As you are aware and as we have discussed in this blog before, the revisions to the Department of Labor’s overtime regulations are set to go into effect on December 1, 2016. In light of this impending change, the United States Congress and various states have taken action to delay the change. On September 20th, 22 states (including Texas) filed a declaratory judgment lawsuit in the United States District Court for the Eastern District of Texas (Sherman Division).
The states based their lawsuit on the fact that they are subject to the new regulations and that state employees will be affected by the change in the regulations. The states argued that the United States Constitution limits the federal government’s authority over the states’ operations. They also argued that the proposed salary level “failed to account for regional and State variations in salaries and economic vibrancy.” In their lawsuit, the states argued that by changing the salary portion of the exemption test effectively creates a minimum overtime-exempt salary level for white collar employees (i.e. effectively disregarding the duties portion of the test due to the high salary level). The states also argued that the automatic salary increase every three years violates the Administrative Procedures Act because the increase every three years will not go through the required notice-and-comment rule making process. Finally, the states argued that the revised regulations will irreparably harm the states because (a) they “cannot reasonably rely upon a corresponding increase in revenue” and “will have to reduce or eliminate some essential government services and functions” and (b) may have to eliminate some government employment positions due to budgetary constraints.
The states sought a declaratory judgment on five grounds: (1) that the revised regulations violate the 10th Amendment of the U.S. Constitution because the new regulations infringe upon state sovereignty by dictating the wages states must pay to state employees; (2) that the revised regulations exceed congressional authorization because Congress did not intend an employee’s salary level to be a proxy for determining exemptions, white collar employees that don’t meet the salary test won’t be exempt, and the automatic increases every three years are without congressional authority; (3) that the automatic increases every three years violate the notice-and-comment rule making process required by the Administrative Procedures Act; (4) that the revised regulations are arbitrary and capricious; and (5) that the revised regulations improperly delegate congressional legislative power by establishing a federal minimum salary level for white collar workers.
The lawsuit seeks a temporary and permanent injunction to stop the revised regulations from going into effect on December 1, 2016. We do not know where this will go but the most likely outcome is that the automatic increases will be stopped while the remainder of the regulations will go into effect as written on December 1, 2016. We will update you as soon as there is a decision but we recommend you proceed as if the regulations will go into effect and plan accordingly so that you are prepared.
In addition to the lawsuit, the U.S. House of Representatives passed a bill on September 28th that would delay by six months the effective date of the new regulations. The bill would make June 1, 2017 the new effective date. Also on September 28th, Senator James Lankford (R-Okla.) introduced a bill in the U.S. Senate to delay the regulations. It is expected that even if the Senate passes this bill and the Senate and House of Representatives jointly present a law to the President delaying the effective date, President Obama will veto any such bill. At this time, this legislative action appears to be more of a public relations move than anything.
As always, we will keep you updated on any news related to the new overtime regulations.
