I’ve been telling everyone for the past several months that, so far, there hasn’t been any legal challenges to the US Dept of Labor’s new “Final Rule” on overtime which is slated to go into effect at midnight on December 1, 2016. However, that’s not the case now.
The overtime rules implemented by the Obama administration are scheduled to take effect Dec. 1. The regulation, which was finalized in May, makes anyone earning up to $47,476 a year, or roughly $913 a week, eligible for overtime pay — a dramatic increase over the $23,660 cutoff now. But the lawsuit argues the rule is unconstitutional because it dictates wages that states must pay employees for government functions, according to the Review-Journal.
It also argues the change would upset the state budgeting process by requiring states to pay overtime to more employees.
“Longstanding federal law requires an overtime exemption for ‘bona fide executive, administrative or professional’ employees,” Nevada Attorney General Adam Laxalt (R) said in statement to the Review-Journal. He went on to say that the federal government “is forcing state, local and private employers to pay overtime to any employee who earns under a certain amount.”
The Department of Labor says the rule will extend overtime to more than 4 million workers in its first year.
“This long-awaited update will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work,” the agency said, according to the Review-Journal.
Other states that joined in the suit are Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin.
On the surface of it, the new Final Rule would, in fact, have more employees eligible for overtime compensation. But what I’ve found over the last several months…dealing directly with clients, law firms, accountancy firms and employers, is that there seems to be a large “negative” effect in the form of “reduced work hours”; reclassification of “salaried exempt” employees to “non-exempt hourly” regardless of whether or not they were actually and correctly filling the work role of a bonafide “salaried exempt” worker. And, the most dramatic effect so far has been to simply terminate personnel because employers believe they will not be able to afford paying their lowest “salaried exempt” employee $47,476.00 per year.
Many of us in labor law enforcement, have been perplexed over why US Dept of Labor’s Wage and Hour Division never ever considered “phasing in” this new Final Rule. Whenever there has been a substantial increase in the minimum wage on a state by state basis, states will typically “phase in” annual increase “incrementally” until the final minimum wage is reached. So, why US Dept of Labor and Obama administration chose not to do that in this case…is perplexing.