Can These Two Lawsuits Delay the Overtime Rule?

Date: September 22, 2016 Last Edit: September 23, 2016

NFIB and 21 states challenge the sweeping new regulation.

Small businesses are fighting back against the U.S. Department of Labor’s overtime rule.

On Tuesday, two lawsuits—one from NFIB and more than 50 other business groups, the other from 21 states—were filed seeking to delay the Obama administration’s efforts to extend overtime pay to millions more Americans beginning in December.

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The rule will increase the salary threshold from $23,660 a year to $47,476, as well as continually increase the overtime threshold every three years. The lawsuits claim these federal regulations will hurt small businesses, driving up costs and forcing them to cut workers’ hours, slow hiring of full-time staff, and turn salaried workers into hourly employees. 

“In many cases, small businesses must reorganize their workforces and implement new systems for tracking hours, record keeping, and reporting,” NFIB President and CEO Juanita Duggan said last week. “They can’t just flip a switch and be in compliance.” 

The states’ lawsuit argues the rule violates the Constitution. Noted Forbes: “The language seems designed to echo the U.S. Supreme Court’s ruling in the Obamacare case, National Federation of Independent Business v. Sibelius, where 26 states successfully challenged the Medicaid expansion plan in the Affordable Care Act as being unconstitutionally coercive.”

Still, small businesses have been planning ahead in case the new regulations do go into effect. In a Paychex study of small business owners, 33 percent believe the overtime rule will have an impact on their business. Of those, 36 percent say they’ll transition impacted employees to nonexempt status, 21 percent will redistribute hours to minimize overtime, and 7 percent plan to adjust employee salaries in light of the new rule.

While owners are planning ahead, there might be additional relief in sight: Congress introduced legislation on Sept. 21 that would push back the start of the overtime rule

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