States Sue Over New Worker Overtime Rule

Twenty-one states have sued the federal government to overturn the new overtime rule, claiming the Department of Labor is imposing unnecessary costs and abusing its power in violation of the Tenth Amendment. Announced in May, the new rule raised the threshold for eligibility from $23,660 to $47,476, making 4.2 million more Americans eligible for overtime pay effective December 1.

The states that filed suit in federal court in Plano, TX, on Tuesday include Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin.

The suit says the federal Department of Labor simply doubled the salary basis in determining who is eligible for overtime instead of considering the type of work performed. The suit also criticizes the three-year indexing feature, which automatically increases the salary level every three years without going through the rule-making process required by law.

“By committing an ever-increasing amount of State funds to paying State employee salaries or overtime,” the lawsuit says, “the Federal Executive can unilaterally deplete State resources, forcing the States to adopt or acquiesce to federal policies, instead of implementing State policies and priorities.” The suit adds that ultimately some governments and private businesses may be forced to eliminate services or lay off employees.

The suit argues that the rule defies congressional intent and should be declared unconstitutional, saying the Tenth Amendment, which reserves for the states or the people all powers not expressly granted to the federal government, prevents the president’s administration from forcing changes in how states pay their workers.

“Once again, President Obama is trying to unilaterally rewrite the law,” Texas Attorney General Ken Paxton said in a press release. “And this time, it may lead to disastrous consequences for our economy.”

The U.S. Chamber of Commerce and the National Retail Federation both expressed displeasure with the rule, arguing that businesses will be unable to afford the increased labor costs and timekeeping systems associated with the new regulation. Their belief is that companies will either convert salaried employees to punch-in, punch-out hourly workers or lift employees’ base pay to the new threshold to avoid paying overtime.

The Obama administration said the new rule was a long-overdue update of the Fair Labor Standards Act, which went into effect in 1938 and hasn’t “kept up with our modern economy.”