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Overtime Expansion Gets Heated as States Challenge Rule

The information in this blog post refers to the proposed and final rules published by the U.S. Department of Labor in 2015-2016. To see the most recent information, click here.

Overtime Expansion Gets Heated

Twenty-one states have filed a lawsuit in an attempt to halt the Department of Labor’s overtime expansion ruling. According to the complaint, the agency’s move to increase the salary threshold at which white-collar workers are eligible for overtime is unlawful, as it renders other statutory exemption requirements “virtually irrelevant.” A similar lawsuit was filed by a group of business representatives on the same day.

Details of the lawsuit

The lawsuit, filed in the U.S. District Court for the Eastern District of Texas, criticizes the Department for overstepping its boundaries in two main areas:

  1. Determining eligibility: The Department of Labor’s rule focuses on the salary of each worker; relegating the type of work that employee performs to a “secondary consideration.” Additionally, the lawsuit claims this act essentially impacts states’ budgets because of the need to pay overtime to a larger number of employees.
  2. Automatic updates: Those involved also take issue with the new rule’s provision to update the standard salary threshold every three years based on inflation, arguing that the department does not have the power to index or automatically raise the threshold.

It appears the suit is a last-ditch effort to block the rule from going into effect, as congressional resistance likely would be met with a presidential veto.

What employers need to keep in mind

In response to the suit, U.S. Secretary of Labor Thomas Perez said, “We are confident in the legality of all aspects of our final overtime rule.” And despite the filing of this lawsuit, the new rule is on track to take effect Dec. 1. With only 70 days for employers to prepare, employers should consider:

  1. Auditing their workforce. A proper audit would entail employers determine:
    • How many exempt employees they have making less than $913 per week.
    • Whether or not these employees pass the duties test for exempt status.
    • How much overtime these employees work.
    • How much that overtime would cost with the new rules.
  2. Evaluating their plan. Seeing the costs associated with pursuing different workforce restructuring tactics for individuals and groups of employees can help employers build potential cost-based strategies and ­­­see the companywide impacts they could have. Be sure to take a second look at your options using data from your time and attendance and payroll systems, because it potentially could save your organization big in the long run.

Paycom’s FLSA toolkit to the rescue

Ultimately, every company is different and will have to figure out the best path moving forward. However, the sooner you can get a plan of action in place, the easier it will be on your HR team and all of your employees. With Paycom’s new Labor Cost Analysis tool, you can help establish the most cost-effective and least disruptive plan possible.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.