NAHB, Business Groups Sue to Block Overtime Rule

Filed in Advocacy, Labor, Legal by on September 21, 2016 13 Comments

hardhatgavelNAHB and a coalition of more than 55 Texas and national business groups have filed a lawsuit against the U.S. Department of Labor (DOL) seeking to halt its federal overtime rule set to take effect Dec. 1.

Earlier this year, the DOL issued the rule, which will double the current overtime salary limit of $23,660 to $47,476. It also allows the minimum salary requirements to be raised every three years.

NAHB and many groups not in favor of the rule have warned that such a huge jump in such a short period of time could actually hurt a significant number of the workers the rule was meant to help. Many small business owners would be forced to scale back on pay and benefits, as well as cut workers’ hours.

The lawsuit filed on Sept. 20 in the U.S. District Court for the Eastern District of Texas asserts that the DOL exceeded its statutory authority in issuing the regulation and violated the Administrative Procedure Act, which governs the way federal agencies can establish regulations. The legal action seeks to bar the DOL from implementing the rule. A coalition of 21 states this week also filed a separate challenge to the rule in the same court district.

NAHB has also been leading the charge to seek a legislative solution and worked closely with Rep. Kurt Schrader (D-Ore.), who recently introduced bipartisan legislation to help small businesses and their workers by mitigating the effects of the overtime rule.

The Overtime Reform and Enhancement Act (H.R. 5813) would allow small businesses operating on tight budgets sufficient time to adjust to the overtime rule by gradually raising the $47,476 threshold under the following timetable:

  • Dec. 1, 2016 – $35,984
  • Dec. 1, 2017 – $39,814
  • Dec. 1, 2018 – $43,645
  • Dec. 1, 2019 – $47,476

Moreover, the legislation would eliminate a provision in the rule that requires automatic increases to the overtime salary threshold moving forward. NAHB is strongly urging Congress to swiftly pass this legislation.

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Comments (13)

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  1. This is HUGE! Thank you as it would help a ton in our small business. How can we follow this and provide input and support?

  2. C. Williams says:

    I am a salary employee that had my annual salary pay cut in May 2016 from $48,734.00 to $25,000 after 18 years of service. After arguing my points of discrimination, since no one else had a salary decrease, they increased the salary back to $35,000.00 but that is still $13,000 less than what I before. I was waiting for this to be put in effect to see what my company was going to do in reference to my salary. I work at a financial institution and am a mortgage loan originator. I was the mortgage loan manager for 15 years and that too was changed in May 2016. I understand this may hurt the construction side if an employee is salary that maybe runs the job but in my situation, if the salary increase doesn’t go in effect, I will be facing bankruptcy….I am a single white female and just turned 62 in June 2016.

  3. This rule, even with you amending it will only push the Hispanic workforce further underground. Talking about sub crews who barely follow labor rules to begin with.

  4. Scott says:

    As a CFO of a custom home builder, we have no salaried positions where our employees makes less than the new limit of 47k. Those who object to this law are either grossly under paying their employees or using the current limit of $24k to illegally avoid overtime. At least with the new limit the employer cannot play both sides – that is underpaying of their employees and working them over 40 hours without paying OT.

    • Chad Umlauf says:

      Not sure where you are at but here in South Dakota it is well over what is fair. Paying my site supervisor a salary of $40,000/year plus benefits has allowed him to quit the two jobs he previously had to make ends meet and now he has more time with his family while ensuring he has steady pay regardless of workload. This new rule will force me to put him back on hourly and he’ll be exactly where he was before. The people who are ‘illegally avoiding overtime’ are the people subbing everything out and not paying anyone a salary, nor benefits. This will screw a lot of people over, and it’s not the employers.

  5. I vehemently disagree with you Scott. I own a design firm that furnishes model homes and we are based in Fort Worth Texas. The median cost of living here is far below the national average, as is median starting salary for beginning designers. These people have just graduated with an undergraduate design degree and are basically trainees and are not worth 48K to me. The starting salary averages about 36K, which is a livable wage with our low cost of living. I was quoted in Fortune Magazine as saying that I will have to hire fewer design professionals and have them direct more hourly labor. In short, it is going to hurt young college graduates the worst, I think.

  6. Lisa Pippin says:

    This is helpful, thank you! The economy as a whole will be hurt significantly if this law goes into effect. II agree with previous statement, it will hurt the people it is suppose to helpthe most.

  7. John says:

    Where the DOL completely fails to understand the needs of employees AND businesses, is the fallacy of legislating with a “One-Size-Fits-All” approach. Just in case everyone has forgotten, there are major compensation ranges from state to state as well as metropolitan areas to rural areas. It is not different than the minimum wage argument. $15/hour might seem appropriate I(and for some even low) in San Francisco or New York, but in rural Iowa it might put a real strain on small businesses. Similarly, there most certainly are exempt level positions paying in the upper $30’s to low $40K in annual salary in rural areas.
    What we must realize, is that this type of legislation takes away the ability for employer and employee to agree on compensation where supply meets demand. One factor forgotten in this debate as well is the potential effect on upward mobility in the young manager level. Example: The young service manager who puts in the extra time to improve the process and efficiency his/her department, who works “extra” to get ahead and get promoted (remember those days?)….he/she will be cut off at 40 hours and told to go home. Another unintended consequence might be for employers to absorb the higher compensation level and in return discontinue 401K plans (with matching contributions), healthcare plans, or scale back to less vacation time etc. etc…..or, employers will simply make the adjustment by converting to a lower hourly pay and pay overtime….until the overtime might not be needed, which effectively will the cut the employees pay from where they originally started!
    Our government has proven again and again that they do not do well managing and regulating with one-size-fits-all approaches. Be aware of the unintended consequences!

  8. Harry Crowell says:

    I am still waiting to hear back from anyone that can show me how the government can make an employer pay any amount of wages?
    Why should government have this ability?
    I have read the Constitution and Bill of Rights and see nothing giving government that right.
    How have we allowed our country to take the right of the employer and allow government employees to run our businesses?

    • Ralph Reitan says:

      Harry and John, you both are Right On! These government agencies and congress-people who are behind the $15 minimum wage movement and this overtime issue are squarely and obtusely divergent and contrarian to fundamentals of Econ. 101 and the laws of nature when the market place rules by the laws of supply and demand. When these fundamental forces are interrupted and/or corrupted we begin to live in an artificial economy that acts out a lie. It continues to corrupt the natural forces as the deviants never really reach the truth. There is a reason why Econ. 101 is taught at every institution in America. It should be a pre-requisite that any president, governor, legislator, representative and council member have attained an A in Econ. 101 prior to running for any seat of government.

  9. Lanny says:

    All this mandate will do is to have employers recalculate a person salary to produce an hourly rate, based on
    their current income as if they worked a certain number of hours per week on average plus X hours overtime X 1.5 time normal salary, less paid vacation time.. Then persons who under normal salary were allowed off time for certain thing that come us would be penalized for missed work hours potentially result in lower hourly payrates..

  10. Lan says:

    Formula for switching Salary over to Hourly.
    40 Hours Week for 52 weeks, ( 52 X 40 = 2080 hours less paid Holidays Jan 1, Memorial Day, July 4th, Labor Day , Thanksgiving ( which eliminates potential overtime for those 6 weeks) = 6 x 8 = 48 , Thus 2080 less 48 = 2032 regular paid hours. 52 weeks less 2 weeks, less 6 weeks that holiday fall within = 6 weeks of not overtime = 42 weeks potential over time will occur x 40 Hours = 1680 hours , Plus 42 plus 4 hours over time = 168X 1.5 = 252 hours, therefore = 1932 maximum probable hours. Divide existing salary by 1932 hours, then set a new hourly rate. Then that are not beneficial to lower paid salary persons, they will be penalized on sick days, they have to take off for some reason. What should be done is to simply raise the minimum hourly wage then let the regional and local labor-market-demand/supply determine pay

  11. MG says:

    As long as Government continues to take money out of our economy in an ever increasing amount there is not enough left to pay wages with. Cutting government cost on all levels leaves more for wages. When there is not enough left to pay fair wages then the Government wants to mandate wages. The result is a very flat economy.
    The FED cannot stimulate the economy with so much Government inefficiency.

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