A coalition of trade associations, including the U.S. Chamber of Commerce and the International Warehouse Logistics Association (IWLA), has filed suit in federal district court to block implementation of the U.S. Department of Labor's proposal to increase the number of workers eligible for overtime pay. The complainants say the DOL overreached its statutory authority under the Administrative Procedures Act, which governs an agency's internal procedures.
The suit was filed yesterday in U.S. District Court for the Eastern District of Texas.
The proposed rule, set to take effect Dec. 1, would double the salary ceiling under which employers must pay overtime to full-time salaried workers. The current level, which took effect in 2004, limits overtime eligibility to workers who make less than $23,600 a year. The new rule would raise that threshold to $47,200 a year. The rule also promises an increase to the salary threshold every three years.
Business interests argue the rule would raise costs nationwide and would hinder job creation. The public warehousing industry, which employs many salaried workers at the affected thresholds, has become one of the rule's most vocal opponents.
"Warehousing and logistics creates new jobs every day. As it stands, the overtime rule will hinder this creation and decrease upward mobility in this sector," said Steve DeHaan, IWLA's president and CEO, in a statement today. DeHaan said the group would do "whatever it takes to fight the DOL's unjustified actions." The DOL formula is pegged to a percentile of earnings of full-time salaried workers in the lowest-wage census region, which is currently the South. In its first year, the rule is expected to make 4.2 million additional workers across multiple industries eligible for overtime pay, DOL has said.
Changes in overtime rules were enshrined in a 2014 White House memorandum directing the department to redefine what type of "white collar" workers should be protected by the minimum-wage and overtime provisions of the Fair Labor Standards Act (FLSA), the landmark 1938 law that introduced the 40-hour work week, established a national minimum wage, and guaranteed "time-and-a-half" pay for overtime in certain jobs.
The Obama administration has said the rule will put more money into the pockets of middle-class workers, such as retail and restaurant managers, who may work beyond 40 hours a week, but in the view of the Administration aren't being fairly compensated for it.
When the rules were published in May, IWLA warned that warehouse owners and managers would need to "brace themselves for big changes in order to maintain costs and stay in business." In an effort to offset higher costs, management may need to delay promotions or force managers to be paid hourly rather than through weekly, biweekly, or monthly payouts, the group said at the time.