© 2016 The Texas Lawbook.
By Natalie Posgate
(Sept. 20) – A consortium of more than 55 Texas and national business groups have filed a federal lawsuit in East Texas against the U.S. Department of Labor in an attempt to preemptively stop from taking effect the government’s new overtime rule that would make more than 4 million American workers eligible for OT pay when it goes into effect this fall.
The 32-page lawsuit, filed Tuesday afternoon, says unless the U.S. District Court for the Eastern District of Texas vacates and sets aside the new overtime rule, which is slated to go into effect Dec. 1, the rule will cause significant “economic harm to both employers and employees” and impair employers’ statutory rights to treat as exempt executive, administrative, professional and computer employees from overtime pay.
The lawsuit, which includes the Plano Chamber of Commerce, Texas Association of Business and many other state and national business and trade organizations, follows a lawsuit filed earlier Tuesday by Texas Attorney General Ken Paxton and officials from 20 other states. That lawsuit was also filed in Sherman.
Dallas shareholder Rob Friedman of Littler Mendelson, the lead attorney for the business group plaintiffs, declined to comment on the lawsuit.
U.S. Secretary of Labor Thomas E. Perez, also a named defendant in both lawsuits, said in a written statement that he looks forward to “vigorously defending our efforts to give more hardworking people a meaningful chance to get by.
“We are confident in the legality of all aspects of our final overtime rule. It is the result of a comprehensive, inclusive rule-making process,” Perez wrote. “Despite the sound legal and policy footing on which the rule is constructed, the same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics.
“Partisan lawsuits filed today by 21 states and the U.S. Chamber of Commerce seek to prevent the Obama administration from making sure a long day’s work is rewarded with fair pay, he added. “The overtime rule is designed to restore the intent of the Fair Labor Standards Act, the crown jewel of worker protections in the United States. The crown jewel has lost its luster over the years: in 1975, 62 percent of full time salaried workers had overtime protections based on their pay; today, just 7 percent have those protections – meaning that too few people are getting the overtime that the Fair Labor Standards Act intended.”
Finalized in May, the DOL’s new overtime rules will require employers to double the annual salaries of employees exempt from overtime pay from the current minimum of $23,660 to $47,476. Employers will also be subject to a new “index” provision that will set in motion an update to the minimum salary requirements every three years.
The Obama administration and worker’s rights groups claim that many businesses wrongly classify lower hourly wage earners as managers or supervisors so that they can force the employees to work extra hours without properly compensating them.
Since the May announcement, business advocates have vehemently opposed the new rules, claiming the wage increase is so large that it does more harm than good – not just to the employers, but employees also.
“The increase in salary is so outrageous, so absolutely extreme and so totally out of touch with what the business world today and employers in our community look like that we will leave absolutely no stone unturned in our effort to get the new rules changed or rolled back,” said Jade West, senior vice president for government relations at the National Association of Wholesaler-Distributors, which is one of the named plaintiffs in the lawsuit.
“I don’t think in my now 14 years with the NAW I’ve seen an issue that has distressed my members and the business community at large more than this,” she added. “There is no other issue that has caused them greater anxiety – not because they don’t want to pay their employees what they’re worth; they already do. It will take a lot of really good professional employees… off salary, and throw them into punching a time clock simply because the DOL has no clue how employers and the business world really works.”
The groups argue in Tuesday’s lawsuit that the new rules will disrupt the workflow and opportunity for professional advancement for employees whose roles are truly designed for the salaried pay structure when their employers inevitably move them to hourly pay because they can’t afford to increase their salary to the DOL’s minimum requirement.
“These folks are not going to be allowed to go to training conferences, travel for the company, attend evening or weekend events if they all have to be paid overtime hours to do so,” West said. “All those things employees can do to advance their career will be denied.”
The business groups argue the DOL’s new rules should be blocked because they violate the Fair Labor Standards Act and the Administrative Procedure Act. The rules violate the FLSA, which “declares that employers shall have no obligation to pay overtime to any employee who is an executive, administrative, professional or computer-professional employee,” the lawsuit says.
The groups also claim the rules violate the APA, which says “an agency may not ignore significant evidence in the record, draw conclusions that conflict with the record evidence, rely on contradictory assumptions or conclusions, consider factors that Congress did not permit the agency to address, or fail to consider an important aspect of the problem it purports to be remedying.”
The lawsuit also names the DOL’s Administrator of the Division of Wage and Hour David Weil as a defendant.
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