A lawsuit challenging a revision of rules governing overtime pay was filed on behalf of 21 states in federal court on Tuesday.
Nevada Attorney General Adam Paul Laxalt and Texas Attorney General Ken Paxton are leading an effort that seeks to overturn a law that was revised by U.S. Department of Labor. The U.S. Chamber of Commerce and more than 50 business groups joined the mostly Republican states’ attempt to limit federal “overreach,” filing a separate lawsuit on the same day in the United States District Court, Eastern District of Texas.
The lawsuits are the latest legal protests that accuse the Obama administration of abusing executive power in putting “heavy-handed” regulations in place. The president ordered the Labor Department to revise the Fair Labor Standards Act.
Starting Dec. 1, it requires employers to pay overtime for all salaried and hourly workers who earn less than $47,476 a year. That is double the current amount, $23,660, a worker can earn annually before their employer can be exempt from paying overtime. It was last updated in 2004.
The Labor Department estimates the change will benefit 4.2 million employees who will receive extra pay for working more than 40 hours a week during the first year. But opponents warn it will force private and public employers to lay off workers and switch salaried positions to hourly.
With more workers eligible for overtime pay, businesses might need to put a larger share of profits toward keeping budgets in the black. Unplanned expenses also make it harder to balance the state’s two-year, multibillion-dollar budget without tax hikes, Nevada Solicitor General Lawrence VanDyke told AMI.
He questions the federal government’s legal authority to mandate the amount that states have to pay workers without limitations. In the revised law, adjustments to the annual income needed for overtime exemptions are required every three years. It calls for salary growth in the poorest parts of the country to be considered.
In the lawsuit, states argue they’re entitled to controlled overtime costs under the so-called “white-collar” exemption for executive, administrative and professional workers, making less than $455. Raising the mark to $915, a move that significantly affects government and private employers, is illegal without input from the public or congressional approval, VanDyke said.
“You’re looking at a crippling hit to the budget every three years,” he said. “The states are getting crushed.”
U.S. Secretary of Labor Thomas E. Perez defended the policy’s legality in a prepared statement: “The same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics,” he said. "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 law has lost its luster, Perez said, noting 62 percent of full-time, salaried workers were entitled to overtime pay in 1975, compared to 7 percent today.
Supporters credit the federal move for bringing nonunion employees closer to enjoying the protections provided by organized labor.
Bethany Khan, a Culinary Union spokeswoman in Las Vegas, said all the workers it represents, more than 57,000, get overtime wages. The extra pay is guaranteed in labor contracts, even for those who bring home six-figure paychecks.
But some fear salaried workers without union protections will find themselves punching a clock for fewer benefits and lower pay once the new rule takes effect.
“This isn’t rewarding hard work, it’s discouraging it,” said Randi Thompson, Nevada’s director of the National Federation of Independent Businesses. The 325,000-member national nonprofit is among the groups suing to stop, or at least delay the law, until June 1, 2017.
Thompson acknowledges some employers aren’t paying fair wages. But, she said, putting the burden on small businesses to comply with “complicated and arduous” regulations on a tight timeline won’t help anyone.