The Manufacturers’ Center for Legal Action filed a complaint with a coalition of other associations on September 20 to challenge the Department of Labor’s (DOL) new overtime rule, asserting the new rule exceeds the authority of the DOL under the Fair Labor Standards Act (FLSA). Unless a court stops it, this unprecedented rule will impair employers’ ability to classify as exempt from overtime executive, administrative, professional and computer employees. The new rule will go into effect on December 1, 2016, causing economic harm to both employers and the employees who will be subject to the new overtime requirements.
The new overtime rule drastically alters the DOL’s minimum salary requirements—increasing the minimum by 100 percent, from $23,660 to $47,476 annually—so as to impose new overtime payment requirements on businesses of all sizes. This directly effects those individuals who have historically been considered exempt from overtime pay. Due to the drastic rise in the salary threshold, employees will have to be reclassified and will inevitably lose many of the benefits and flexibilities that go along with being an exempt employee, such as flexible work schedules that permit employees to sometimes work outside of the normal business hours due to personal obligations.
In addition, the DOL’s new rule permits employers for the first time to count nondiscretionary bonuses, incentives and commissions toward up to 10 percent of the minimum salary level for exemption; however, this provision is so restricted by the DOL as to be meaningless. It also establishes an unprecedented automatic “escalator” provision that will dramatically increase the minimum salary every three years without a rulemaking. Congress has provided for automatic increases in other areas, such as the cost of living for Social Security benefits, but Congress has never provided for automatic increases of the minimum wage. The escalator provision exacerbates the detrimental impact on businesses, both large and small, by automatically updating the minimum salary requirements to even higher levels every three years.
The DOL has failed to recognize the infeasibility, costs and real-world impacts of the new overtime rule. As noted in our press release, manufacturers of all sizes will bear the burden of this costly regulation that will force many employers to cut critical programming, staffing and services to the public. Many of these employers will lose the ability to effectively manage their workforces and provide flexibility to valued employees on the pathway to the middle class. This new rule will injure employers and employees across many industries, job categories and geographic areas by denying them opportunities for advancement and hindering performance of their jobs. We are hopeful that the court will understand the importance of this issue and overturn the DOL’s new overtime rule.