On September 20, 2016, two lawsuits were filed in Texas that ask the court to invalidate the U.S. Department of Labor's (DOL's) revised overtime exemption rules, 81 Fed. Reg. 32391 (May 23, 2016). Both lawsuits also ask the court to enjoin the DOL from enforcing the new overtime rules that are currently set to take effect on December 1, 2016. The revisions included in the DOL's overtime exemption rules would: (1) raise the standard salary threshold from $23,660 per year to $47,476 per year; (2) increase the annual salary threshold for highly compensated employees (HCE) from $100,000 to $134,004; and (3) require automatic increases every three years, beginning January 1, 2020.
Nevada v. Department of Labor
One lawsuit was filed by the State of Nevada and 20 other States. Nevada v. Department of Labor complaint. Hawaii was not amongst the states challenging the overtime rules. The 21 states participating in the lawsuit, indicated in red in the picture below, were: Alabama, Arizona, Arkansas, Georgia, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, South Carolina, Utah, Wisconsin, Kentucky, Iowa, Maine, New Mexico, Mississippi, and Michigan, Nevada, and Texas.
The states sued in their capacity as employers and challenged the new overtime rules based on numerous arguments, including those listed below:
- The DOL violated the Tenth Amendment by applying the FLSA to the States since employment, services, and budgetary matters are attributes within State sovereignty.
- The DOL exceeded its rulemaking authority by creating rules related to the salary basis test, the HCE compensation level, and automatic increases because Congress did not specifically grant the DOL rulemaking authority on those issues.
- The automatic salary adjustments every three years unlawfully eliminates the notice-and-comment rulemaking process required by Administrative Procedure Act, in addition to failing to comply with the FLSA requirement of the Secretary of the DOL to "define and delimit from time to time" the white collar exemption.
- The FLSA failed to "lay down any intelligible principle by which DOL was to establish the qualifications of the white collar exemption" and therefore Congress unlawfully gave the DOL "unlimited legislative authority."
Plano Chamber of Commerce v. Perez
The second lawsuit was filed by numerous Texas and national business groups including the National Association of Manufacturers and National Federation of Independent Business. Plano Chamber of Commerce v. Perez complaint.
The allegations raised by the coalition of businesses include the following:
- By raising salary threshold so high and disqualifying millions of bona fide executive, administrative, and professional employees from exempt status, the DOL exceeded its statutory authority under the Administrative Procedure Act.
- The new indexed escalator provision was not authorized under the FLSA and fails to go through the notice-and-comment rulemaking requirements under the Administrative Procedure Act.
- The DOL failed to properly justify the new overtime rule and therefore, the rules should be considered arbitrary and capricious.
Why Texas?
On September 20, 2016, two lawsuits were filed in Texas1 that ask the court to invalidate the U.S. Department of Labor's (DOL's) revised overtime exemption rules, 81 Fed. Reg. 32391 (May 23, 2016).
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1Earlier this year, another federal court in Texas issued a nationwide injunction prohibiting the DOL from enforcing another controversial rule. At issue in that case was the DOL's persuader rules entitled, "Interpretation of the ?Advice' Exemption in Section 203(c) of the Labor-Management Reporting and Disclosure Act," 82 Fed. Reg. 15,923 (Mar. 24, 2016). Those persuader rules had taken effect on April 25, 2016 and was supposed to apply to agreements entered into on or after July 1, 2016. However, as of June 27, 2016, the DOL could not enforce those rules pursuant to a temporary injunction pending final resolution of the case. See National Federation of Independent Business v. Perez, No. 5:16-cv-00066-C (N.D. Tex. June 27, 2016).