This past summer, the department of labor, adopted new rules scheduled to go into effect December 1, 2016. As written, the rule would have resulted in an unprecedented doubling of the minimum salary threshold for employees to be considered executive, administrative, or professional employees and, thus, exempt from the overtime requirements of the Fair Labor Standards Act.
The rule would have significant adverse effects on businesses, nonprofit groups and employees. It would dramatically change which employees must be paid overtime if they work more than 40 hours a week. The new salary threshold would have gone from $455 a week ($23,660 annually) to $913 a week ($47,476 annually) - a 100% increase. Employers would face two choices - increase an employee’s salary to continue classifying them as exempt or reclassify them to be eligible for overtime. Clearly, the local business community would be negatively impacted by this regulation.
The Greater Killeen Chamber of Commerce, acting through its Public Policy Council and Board of Directors, joined more than forty local chambers of commerce in Texas, the U.S. Chamber of Commerce, the Texas Association of Business and more than a dozen other sector-specific business groups in a lawsuit against the Department of Labor to stop this rule from going into effect.
Recently, Judge Amos Mazzant, in the U.S. District Court of the Eastern District of Texas, granted our request for a preliminary injunction to halt the implementation of this new rule. While there are legal issues to be resolved, it is likely, given the change in administrations, that this rule will be dropped by the Department of Labor.
Our lawsuit advanced three kinds of legal arguments against the rule:
- The excessively high salary threshold contradicts the intent of Congress to have executive, administrative, and professional employees exempt from overtime;
- The automatic update provision included in the new rule, which would impose new salary thresholds every three years without going through rulemaking, is not authorized by the Fair Labor Standards Act and, in fact, the automatic provision is contrary to FLSA requirements that contemplated changes to rules must be made through the notice and comment regulatory process; and,
- The Department of Labor acted arbitrarily and capriciously in promulgating its new overtime rule in violation of the federal Administrative Procedure Act.
Excessive regulations add to the cost of products and services and make your business, other businesses in our community and our nation less competitive. Unfortunately, regulations are often created, as they were in this case, by academic bureaucrats with little business experience. Acting through a collaboration with our partners, our chamber is gratified to have a role in stopping this onerous rule before it could impact your business.
Written By: John Crutchfield III, President & CEO, Greater Killeen Chamber of Commerce
Published in the Greater Killeen Business Quarterly 2016 Annual Report & Economic Outlook