21 States & 50 Business Groups Sue OSHA to Stop Overtime Rule

Twenty-one states and a coalition of more than 50 business groups filed separate lawsuits Tuesday seeking to overturn a sweeping federal regulation designed to qualify millions more Americans for overtime pay starting in December, a step the Obama administration considers one of its signature workplace achievements.

Attorneys general in Texas and Nevada filed their lawsuit on behalf of their states and 19 others, arguing the Labor Department rule violates the U.S. Constitution and exceeds congressional authority. The coalition of more than 50 business groups led by the U.S. Chamber of Commerce made similar allegations in their suit, which includes trade group plaintiffs from a host of sectors including manufacturing, construction, auto, franchising, retail, lodging and insurance.

The rule, ordered by the White House in an effort to shore up workers’ wages, will increase the salary threshold that generally determines who qualifies for overtime pay, doubling it to $47,476 a year from the $23,660 level last updated in 2004. It also will ensure the threshold is updated every three years by indexing it to salary growth in the lowest income region of the country—an unprecedented step.

The rule is expected to have broad effect on employers, workers and sectors including fast-food, retail, colleges and nonprofits. Many employers have complained it will drive up their costs and cause them to cut workers’ hours, slow hiring of full-time staff and turn salaried workers into hourly employees. The lawsuits filed Tuesday echoed those claims.

“We have heard from our members, small businesses, nonprofits, and other employers that the salary threshold is going to result in significant new labor costs and cause many disruptions in how work gets done,” Randy Johnson, the U.S. Chamber’s senior vice president of labor, immigration and employee benefits, said in a statement.

The National Retail Federation, which is part of the Chamber suit, said research it commissioned found the regulation will force businesses to limit hours or cut base pay for workers to offset added payroll costs.

“Retailers are already struggling to implement this new government mandate before the swiftly approaching deadline, and the automatic update included in the rule would make them do this same dance every three years,” David French, the trade group’s senior vice president for government relations, said in a statement.

Both suits were filed in the U.S. District Court for the Eastern District of Texas, Sherman Division.

Among other things, the lawsuit filed by the states alleges the mechanism in the rule that automatically will increase the overtime threshold every three years was finalized without going through a rule-making process that plaintiffs contend is required by law. The plaintiffs say that means stakeholders won’t have the chance to provide their input before the massive changes take effect.

“Once again, President Obama is trying to unilaterally rewrite the law,” Texas Attorney General Ken Paxton said in a statement. “And this time, it may lead to disastrous consequences for our economy.”

Labor Secretary Thomas Perez defended the regulation Tuesday and called the lawsuits partisan “obstructionist tactics” that will prevent the Obama administration from ensuring Americans are fairly paid when they work extra hours.

The Labor Department has said it received 270,000 public comments on its overtime proposal, including many from industry groups and employers.

In addition to Texas and Nevada, plaintiffs in the suit filed by states include Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Utah and Wisconsin.

All but one of the states are led by Republican governors, while six of them—including Iowa, Maine, Michigan and Wisconsin—have swung recently for Democrats in presidential years and are crucial states in determining the outcome of this year’s election.