Overtime Rule May Be Subject to Legal Challenges

May 19, 2016

[Editor's note: A federal district court has granted a preliminary injunction blocking the overtime rule from taking effect Dec. 1.]

Despite the Department of Labor’s (DOL’s) adjustments in response to employer criticisms of its proposed changes to the overtime regulations, the final overtime rule may be challenged in the courts and Congress, management attorneys say.

Adjustments that have been made in employers’ favor include:

  • No changes to the duties tests. No specific changes had been proposed to the standard duties test, but the proposed rule had requested comment on whether the duties tests were working as intended.
  • Triennial rather than annual increases in the minimum standard salary level for exempt employees.
  • A 200-day rather than 60-day implementation window.

However, Paul DeCamp, an attorney with Jackson Lewis in Reston, Va., and former administrator of the DOL’s Wage and Hour Division, said, “One obvious area for legal challenge to the rule is the automatic salary threshold updates. Under the Administrative Procedure Act (APA), those updates are likely to be seen as substantive, thereby requiring a whole new round of notice-and-comment rulemaking each time.”

FLSA Overtime Rule Compliance

For more overtime compliance news, tips and tools, check out the SHRM resources provided below:

· FLSA Overtime Rule Resources Guide
· Compliance Checklist · Infographic
The DOL also might be challenged in the courts for going “much too far in setting the salary threshold this time,” DeCamp added. Millions of jobs currently encompass duties that are clearly exempt and have been since the passage of the Fair Labor Standards Act (FLSA) in 1938. But these jobs—and the workers who hold them—no longer qualify for exempt status due solely to the new salary figure, he noted.

Rendering employees nonexempt even though they are performing jobs that Congress in 1938 would have viewed as exempt violates the APA because it is unreasonable and contrary to the FLSA, DeCamp said.

Yet, he added that this is a tougher argument to make than challenging the automatic salary threshold updates because the DOL has long had broad authority to define the parameters of the exemptions, including the salary level threshold.

“If DOL had set the new level at $1 million a year, courts probably wouldn’t hesitate to strike the regulations. So, clearly there is a theoretical limit to otherwise plenary rulemaking authority if it looks like DOL is regulating in a way that, as a practical matter, renders unavailable the exemptions that Congress wrote into the statute,” he added. “If a federal judge in Alabama, Mississippi, Puerto Rico or some other part of the country where wage levels are well below the national average decides that the impact in the locality is severe and inconsistent with congressional intent, there is a chance that an injunction could issue.”

Congressional Measures

DeCamp noted that there also is the possibility of withdrawal of the rule during a subsequent presidential administration under the Congressional Review Act, free-standing legislation to retract the rule and appropriation riders. However, he said, “I am not betting on any of those legislative routes bearing fruit, but it is always possible.”

U.S. Sen. Lamar Alexander, R-Tenn., announced May 18 that he would introduce a Congressional Review Act resolution to stop the implementation of the regulation, said Alexander Passantino, an attorney with Seyfarth Shaw in Washington, D.C., and a former acting administrator of the Wage and Hour Division.

“Any legislative fix, of course, is subject to presidential veto, so it will need to be the right vehicle if a solution is to get passed," Passantino said. “In the next administration, it would be fairly simple to propose a rule eliminating the automatic updating provision, then take comments on that proposal and issue a final rule before Jan. 1, 2020. The same is technically true for the salary level itself, but that kind of change would bring much more political heat.”

“As with litigation, only time will tell if Congress will alter the destiny of this final rule, but elections do have consequences,” noted Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and a former acting administrator of the Wage and Hour Division.

In the meantime, Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City, cautioned, “With the benefit of more than six months until the final rule takes effect, employers should not delay in self-auditing their workforce to determine whether any of their workers will fall short of qualifying [as exempt under] the final rule and then take the necessary steps to either increase workers’ salaries or convert them to nonexempt.”

For more information on the overtime rule, visit the Society for Human Resource Management Overtime Rule Resources hub.



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