A group of 21 states, including Texas, filed a lawsuit today in the Eastern District of Texas challenging the U.S. Department of Labor’s new overtime exemption rules that are supposed to go into effect on December 1, 2016, arguing the agency unconstitutionally overstepped its authority to establish a federal minimum salary level for white collar workers.
Back in May, the White House announced that the new overtime rules would go into effect on December 1, 2016. As I have previously written, the new rules would raise the threshold salary requirements for administrative, professional and executive exemptions from $23,660 to $47,476 annually. They would also raise the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test from $100,000 to $134,004. Needless to say, many businesses have opposed such a drastic change. It appears that the states have a problem with it as well.
In the lawsuit, the States argued that they employ many employees who are currently classified as exempt and who would have to be reclassified under the new DOL rules because their salaries do not meet the new DOL salary threshold of $913 per week. Thus, the federal government “could deliberately exhaust State budgets  through the enforcement of the overtime rules.”
Raising the question of states rights under the U.S. Constitution, the States argue that the federal government cannot “dragoon and, ultimately, reduce the States to mere vassals of federal prerogative” and that the new overtime rules would do just that by forcing the States to shift resources from other important priorities to increased payroll for certain employees and “effectively impose the [federal government’s] policy wishes on State and local governments.”
Specifically, the States seek: (1) a declaratory judgment declaring the new overtime rules unlawful and arbitrary and capricious; (2) a temporary injunction preventing the DOL from enforcing or implement the new overtime rules; and (2) a permanent injunction preventing the DOL from enforcing or implement the new overtime rules.
If the District Court grants the states a temporary injunction prior to December 1, 2016, the DOL might not be allowed to start the enforcement of the new overtime rules on that date. However, employers should continue to prepare for the new overtime rules as if they are still going into effect on December 1, 2016. Stay tuned for updates regarding this case . . .
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at email@example.com or (214) 531-2403.