Business Groups First to Sue Over Biden DOL Overtime Expansion

More than a dozen businesses and industry lobbying groups are asking a federal court to toss out a new US Labor Department rule that seeks to expand overtime pay protections to about 4 million workers.

The lawsuit, filed Wednesday in the Eastern District of Texas, argues that the regulation narrowing an exemption to overtime pay requirements went beyond its authority under the Fair Labor Standards Act and violated the Administrative Procedure Act.

“The Department has failed to adequately justify the dramatic change in policy embodied in the Rule, failed to take into account the strong reliance interests of the regulated community, and failed to meaningfully consider reasonable alternatives,” the complaint argues.

Litigation against the Biden rule, released April 23, was widely expected, as business groups also sued to block Obama- and Trump-era attempts to update overtime requirements.

Under the FLSA, certain “white collar” workers can be exempt from overtime pay requirements if they are salaried, make more than a certain amount each year, and work in a “bona fide executive, administrative, or professional capacity.”

The new rule updated the earnings piece of that test so that workers making less than $58,656 a year would now be automatically owed overtime pay. It would also update that salary threshold every three years.

But business groups suing over the rule, including the American Hotel and Lodging Associations, the Associated Builders and Contractors, the National Retail Federation, say it ignores concerns raised by the business community and runs afoul of the court’s past legal decisions on the issue.

Notably, the case was filed in the same Texas court that struck down a similar overtime rule issued by the Obama administration that sought to raise the salary threshold to $47,476. In that 2017 ruling, Judge Amos Mazzant found that the DOL rule focused so much on a salary level to determine whether a worker was exempt from overtime, it eliminated the consideration of their job duties.

The latest lawsuit argues that the new rule ignores that precedent.

“Just as in 2017, the Department’s new salary threshold is so high that it is no longer a plausible proxy for delimiting which jobs fall within the statutory terms ‘executive,’ ‘administrative,’ or ‘professional,’” the suit says. “The 2024 Overtime Rule thus contradicts the congressional requirement to exempt such individuals from the minimum wage and overtime requirements of the FLSA.”

Phased Approach Challenged

The lawsuit also contends that the automatic triannual updates to the salary threshold would violate notice and comment requirements under the APA. The business coalition requested the court provide expedited consideration of the case given that the first phase of the rule is due to go into effect July 1.

Looming in the background is a separate legal challenge pending in the US Court of Appeals for the Fifth Circuit against a Trump-era overtime rule, which argues that the DOL doesn’t have the authority to consider a worker’s earnings at all when determining whether they are exempt from overtime.

The newly filed lawsuit notes that if the Fifth Circuit were to find that the DOL can’t use salary level in the overtime exemption test, then the rule should be blocked on that additional ground.

The NRF, which represents 4.6 million retail establishments, said it was compelled to join the suit because the new overtime salary threshold and the inclusion of future automatic increases “both exceed the Department’s legal authority.”

“We look forward to demonstrating to the court that the Department overstepped longstanding Fair Labor Standards Act and Administrative Procedure Act principles,” the group said.

Littler Mendelson P.C. and the Restaurant Law Center represent the business groups.

The case is Plano Chamber of Commerce v. DOL, E.D. Tex., No. 24-00468, complaint filed 5/22/24.