The US Chamber of Commerce led the group, including 21 states, in arguing that the administration’s move announced in May exceeded its authority, would sharply raise labor costs for businesses and end up harming workers themselves.
The government “went too far in the new overtime regulation,” Randy Johnson, senior vice president at the US Chamber of Commerce, said in a statement.
“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,” he said.
President Barack Obama and the Department of Labor announced in May that US businesses will have to begin paying overtime benefits to 4.2 million workers called managers but compelled to work long hours for relatively low wages.
Under existing law, so-called “white-collar” workers in positions labeled executive, administrative or professional were exempted from overtime rules that applied to “blue-collar” jobs with hourly wages.
However, the growth of the services industry to dominance in the US economy has put millions in often low-paid jobs classified as “white-collar,” “professional” and “managerial” without rights to extra pay for work weeks of 50 to 60 hours.
In the new rules, the Department of Labor doubled to $913 a week, or $47,500 a year, the pay threshold below which employees must be paid overtime after working 40 hours a week.
In two parallel lawsuits filed in the US district court in Sherman, Texas, the business groups and states challenged the Department of Labor’s power to remove the overtime exemption for white-collar jobs based on a salary measure.
The DOL rule “applies without regard to whether an employee is actually performing ‘bona fide executive, administrative, or professional’ duties,” both suits said.
Not only will the overtime move hurt businesses, they argued, but also force the reclassification of managerial jobs to hourly jobs in ways that will hurt workers’ career potential.
“The Labor Department’s extreme and reckless changes to the overtime rules will hobble the career paths of millions of Americans trying to climb the professional ladder,” said David French of the National Retail Federation, a party in the lawsuits.
US Labor Secretary Thomas Perez vowed the government would vigorously fight the lawsuits “to give more hardworking people a meaningful chance to get by.”
He slammed the erosion of the overtime rule in past decades as fewer people get rewarded for a long day’s work with fair pay.
In 1975, he said, 62 percent of full-time salaried workers had overtime protections based on their pay. Today only seven percent do.
“The same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics,” he said.