Legal Challenges to the DOL’s Final Overtime Rule

October 7, 2016

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On September 20, 2016, in separate federal lawsuits, 21 states and a coalition of over 50 business groups and trade associations challenged the Department of Labor’s final overtime rule. The final rule, effective December 1, 2016, increases the minimum compensation levels for certain white-collar exemptions under the FLSA. Both complaints, filed in the Eastern District of Texas, allege the DOL exceeded its authority and seek various declaratory and injunctive relief. (Nevada et al. v. U.S. Department of Labor et al., Case No. 4:16-cv-00731 and Plano Chamber of Commerce et al. v. Thomas Perez, Secretary of Labor et al., Case No. 4:16-cv-00732).

The complaints cite the concern of employers, including state and local governments, over potentially significant increases in staffing costs in the wake of the new rule. Specifically, the groups challenge the elements of the rule that:

  • Raise the minimum salary level for exempt executive, administrative, and professional employees from $455 to $913 per week ($23,660 to $47,476 annually).
  • Raise the minimum annual compensation level for exempt highly compensated employees from $100,000 to $134,004.
  • Establish a mechanism to automatically update (and presumably increase) the minimum salary and compensation levels every three years.

The two lawsuits join Congressional attempts to block or revise the final rule, and a recent bid by the National Federation of Independent Businesses to delay the rule’s effective date on behalf of small businesses.

Despite legal challenges to the final rule, employers should not delay their plans to meet the December 1 compliance deadline. Doing so could leave employers with too little time to address the necessary changes. Employers can find the DOL’s technical guidance documents and compliance assistance materials on its website, including:

In addition, Practical Law has published a suite of resources aimed at helping employers understand and comply with the new rule: