Is the Overtime Rule Vulnerable? Opponents May Focus Lawsuit on Mathematical Soft Spot

Tuesday September 20th, 2016

Overtime-RuleIt’s been a quiet summer since the Labor Department released its controversial new rule to alter the Fair Labor Standards Act’s overtime provisions in May. But that’s all about to change, as opponents have started gearing up to stop the rule—either by litigation or by legislation—before it takes effect Dec. 1.

Leading the way to the courtroom will be the U.S. Chamber of Commerce, which has long vowed to seek an injunction against the new overtime rule, and is said to be looking for a court to serve as a favorable venue for its case.* But beyond the who and the where of an impending lawsuit, the most interesting variable might be the what—as in, what part of the DOL rule will be the most vulnerable to court scrutiny?

According to a recent Bloomberg BNA article, opponents may have identified it. Their main complaint with the rule will not be what happens Dec. 1, when the salary threshold—the wage level that determines who is and is not eligible for overtime—will more than double, allowing an expected 4.2 million workers to earn overtime pay for the first time. Instead, the lawsuit will likely focus on what happens years into the future, thanks to an added-on provision called “automatic indexing.”

Automatic indexing means, in this case, that the new salary threshold will not stay at its new mark ($47,476 per year) forever. It will be adjusted for the rate of inflation every three years. What’s more, these mathematical adjustments—all almost certainly upward—will happen automatically, without any human involvement necessary.

Opponents feel that automatic indexing would take away lawmakers’ hands-on ability to keep the salary threshold in check. Supporters counter that this is ultimately a good thing, because it won’t require lawmakers to keep going back to the drawing board to recalculate the threshold.

But from a legal standpoint, the crucial question is whether the Labor Department had the authority to add an automatic indexing component to the rule at all.

“Critics of the new rule say automatic indexing isn’t what Congress had in mind when it empowered the DOL to update the exemption ‘from time to time,’” according to the article. There are some laws that explicitly call for automatic indexing, they argue—and the FLSA isn’t one of them.

Anticipating this argument, DOL has acknowledged that the FLSA doesn’t reference automatic indexing. But it added that the law doesn’t mention the salary threshold itself either, suggesting that such specificity is not needed to administer the law.

Meanwhile, on the legislative side, the action has already begun. Several bills introduced by Republicans in Congress before the summer recess are now lining up to be heard, including an appropriations rider to block it. Even a small group of Democrats in the House have filed a bill that would phase in the rule over three years and do away with automatic indexing.

But there are two main forces working against these efforts: an election-shortened final session that leaves little time for distracted politicians to push through any substantive legislation, and a president who will almost certainly veto any measure that would limit the scope of the rule.

That leaves it up to the courts to determine whether the rule will make it to Dec. 1 unscathed, or whether it will be sidetracked or undercut by challenges to its automatic indexing provision.

*According to a news report posted Sept. 15 to Community Impact, a Texas-based website, the U.S. Chamber is indeed leading a “broad business coalition lawsuit” against the rule. Also named were the National Association of Manufacturers, the National Federation of Independent Business, and the Texas Association of Business. An earlier version of this report also said the lawsuit would be filed in Texas and would include the McKinney (Texas) Chamber of Commerce as a plaintiff—a strong indication that the claim will be filed in that jurisdiction. The latest online version, however, removes Texas as the venue and states that the McKinney chamber “supports” the lawsuit but is not a named plaintiff. As of this posting, the filing of a lawsuit has not been confirmed by the other parties.