New Overtime Rules: 21 States Seek Injunction

In May 2016, the Obama administration approved an amendment to the Department of Labor’s rules regarding overtime pay. The new overtime rules would essentially double the salary amount at which a worker would become ineligible for overtime, taking it from $23,660 to $47,476. Middle and lower class workers could see an increase in their pay, but small businesses immediately protested, saying it would cause job losses due to necessary restructuring of their workforce. On Oct. 14, 2016, 21 attorneys general, including South Carolina’s, filed suit on behalf of their states in the U.S. District Court for the Eastern District of Texas, seeking an injunction to block the new overtime rules.

The Rationales

While one might think no one wants to come out against a new overtime rule that would add significantly to so many people’s paychecks, the attorneys general and many of their constituents argue that the new rule would actually cause a net loss for workers. The most common scenario described is that since businesses may not be able to afford the new overtime pay, they would grant fewer hours, instead turning to part-time workers to pick up the proverbial slack (and who, because they would work part-time, would not be eligible for benefits, saving the business money).

In their complaint, the attorneys general also allege that demanding such revisions be made by the states also may infringe upon the “system of federalism”—arguing that forcing states to devote ever-increasing portions of their budgets to increasing salaries depletes the treasury. As a consequence, they allege, taxpayers may go without other essential services because such mandated salary increases would ‘raid’ state budgets. It remains to be seen if this would actually come to pass.

The Procedures

The specific parts of the new overtime rules that are being challenged in the attorneys general’s lawsuit are the salary threshold and the incremental increases. The new overtime rule contains a provision that mandates increases even past the $47,476 threshold in coming years. The complaint makes it clear, however, that the states affected are not denying the rule itself (at least not at the moment); they are requesting injunctive relief, arguing that the salary threshold listed in the amendment needs to be studied and analyzed against current economic trends to assess its viability.

Some may wonder why the injunction is being sought now. The reasons are twofold. First, the holiday season is approaching, and this means that small businesses are already restructuring their employee roster and classifications. Secondly, sufficient information was necessary to see whether an injunction would be necessary. The dire predictions foreseen back when the new overtime rule was passed in May need not come to pass, but as a new fiscal year begins, the rule’s opponents see this as the optimal time to challenge its validity as written.

Seek Knowledgeable Legal Assistance

It is sadly common for middle and lower class workers to be denied overtime, though they are lawfully eligible to receive it. The proposed new overtime rule from the Obama administration seeks to remedy this—but as of this writing, the states’ injunction has not yet been ruled upon. If you believe you are wrongfully being denied overtime, it is best to contact an experienced employment law attorney.

Christopher Potts has been practicing employment law in South Carolina for many years, and is happy to help point you toward answers to your questions. Contact our Charleston office today to set up a free initial consultation.