The suit, filed in U.S. District Court for the Eastern District of Texas, charges that the Department of Labor overstepped its statutory authority in issuing the regulation and violated the Administrative Procedure Act. The rule is slated to take effect on Dec. 1.
The coalition filed the lawsuit against the DOL, Labor Secretary Tom Perez and David Weil, administrator of the DOL’s Wage & Hour division.
David French, senior vice president for government relations at the NRF, said the changes to the overtime rules “will hobble the career paths of millions of Americans trying to climb the professional ladder.”
“Retailers are already struggling to implement this new government mandate before the swiftly approaching deadline, and the automatic update included in the rule would make them do this same dance every three years for as long as they are able to remain in business,” French said. “This is a massive government overreach of executive authority and the courts need to put a stop to it.
The NRF said research conducted for the group showed that overtime regulations will “force employers to limit hours or cut base pay in order to make up for the added payroll costs, leaving most workers with no increase in take-home pay despite added administrative costs.”
It also pointed a separate survey it conducted that found the majority of retail managers and assistant managers the regulations are supposed to help oppose the plan.
“The DOL went too far in the new overtime regulation,” said Randy Johnson, senior vice president of labor, immigration and employee benefits for the U.S. Chamber of Commerce, which is also a plaintiff in the litigation. “We have heard from our members, small businesses, nonprofits and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done.”
Johnson said the new overtime rule will result in salaried professional employees being converted to hourly wages and “reduce workplace flexibility, remote electronic access to work and opportunities for career advancement.”
The DOL’s new regulation, announced in May, will double the salary threshold of workers eligible for overtime pay to $47,476 a year from the current $23,660 a year.
The change in the salary threshold is expected to expand overtime pay and protection to an estimated 4.2 million workers who are currently not eligible under federal law. It is also expected to boost wages for workers by $12 billion over the next 10 years, according to the White House. The threshold will be tied to an index of salary growth and increase every three years.
Under the Fair Labor Standards Act, hourly wage workers are generally paid time-and-a-half for more than 40 hours a week if they earn below a certain salary, but a white-collar exemption has prevented many salaried executives, managers, supervisors and administrators from receiving overtime, according to the Obama administration. The threshold for overtime eligibility was set at $455 a week, or about $23,660 a year, in 2004.
Business groups immediately raised concerns about the impact the rule will have on companies, with some arguing it will hollow out the middle-management tier. Retail experts cautioned at the time that companies will have to adjust to a dramatic change in the way they classify and pay their employees as they try to minimize the additional costs.
The coalition charged in the suit that by setting an “excessively high salary threshold” for determining who qualifies as “executive, administrative and professional employees,” the rule departs from the intent established by Congress in the FLSA and consistently administered by DOL for more than 75 years.
It also charged that the DOL ignored regional and industry differences that have previously been acknowledged, resulting in a “one size fits none” salary threshold.
A provision to automatically update the salary threshold very three years without requiring the regular agency rule making process or opening it to public comment is not authorized by the FLSA or any other statute, the suit argued.
“The justifications offered by DOL for the new minimum salary do not constitute a permissible construction of the statutory terms and are based upon reasoning that is arbitrary, capricious and otherwise contrary to law,” the lawsuit stated.
In addition to the suit filed by the private sector groups, a second lawsuit was filed by a coalition of 21 states against the Obama administration challenging the new overtime rules.