Yesterday a Federal judge in Texas struck down the U.S. Department of Labor’s overtime rule that was set to increase the Federal minimum salary to be exempt from overtime from $23,660 to $47,476.
The Obama-era overtime rule, which was set to take effect December1, 2016, was stayed from enforcement by the same judge shortly before it was set to take effect.
The judge, in his ruling yesterday, said that the Department of Labor improperly considered salary in drafting its rule instead of considering job descriptions. The judge also ruled, “the salary level was set so high that it could sweep in some management workers who are supposed to be exempt from overtime protections.” The National Association of Home Builders estimated that nearly 100,000 construction supervisors were affected by the rule.
Read more about the ruling at Fortune and The Hill.
The Trump Administration recently announced that it has directed the Department of Labor to review the overtime rule and the thresholds for exemption from overtime.
S.C. Attorney General Alan Wilson was one of 21 states Attorneys Generals who challenged the Obama Administration’s overtime rule. The National Association of Home Builders weighed in with briefs making the home building industry’s case on the rule.
On December 6, 2016, the U.S. Department of Labor issued a new rule changing the salary threshold for exemption from overtime pay from $23,660 to $47,476. The rule was promptly stayed by the courts. The National Association of Home Builders took a very active role in challenging the rule in court.
President Trump’s Secretary of Labor, Alexander Acosta, testified at his Senate confirmation hearing that he would prefer a more modest salary threshold than previously proposed, one that is potentially tied to the rate of inflation.
Last month the Department of Labor issued a request for information on the overtime rule. The National Association of Home Builders will submit comments on the rule, as it did last year when the Obama Administration was considering changing the rule.
National Association of Home Builders and a coalition of more than 55 Texas and national business groups have filed a lawsuit against the U.S. Department of Labor seeking to halt its federal overtime rule set to take effect December 1.
Earlier this year, the Department of Labor 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.
National Association of Home Builders 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 Department of Labor 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 Department of Labor from implementing the rule. A coalition of 21 states this week also filed a separate challenge to the rule in the same court district.
National Association of Home Builders 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. National Association of Home Builders is strongly urging Congress to swiftly pass this legislation.
TAKING IT LOCAL
National Association of Home Builders Chief Legal Officer Jim Rizzo and Home Builders Association of Greenville CEO Michael Dey will meet with Attorney General Alan Wilson in October. The lawsuit will be among the items discussed.
The National Association of Home Builders and the National Federation of Independent Business filed a lawsuit yesterday against the U.S. Department of Labor asserting that the agency’s new union persuader rule violates business owners’ First Amendment rights, making it nearly impossible to consult with legal counsel when facing union organizing.
The rule is fundamentally unfair because it requires employers to report to the Department of Labor whether and when they consult with a lawyer to discuss union organizing. The unions, on the other hand, aren’t encumbered by any such requirement.
“The Department of Labors’s final persuader rule is another example of regulatory overreach that will impose far-reaching reporting requirements on employers and their consultants and result in significant monetary and legal implications for home building firms,” said National Association of Home Builders Chairman Ed Brady in a joint press release with National Federation of Independent Business. “This lawsuit is necessary to maintain long standing policy on what union-related communications between employers and attorneys remain confidential.”
The Texas Association of Builders, Texas Association of Business and the Lubbock Chamber of Commerce joined the National Association of Home Builders and National Federation of Independent Business in filing a lawsuit against the Department of Labor in the United States District Court, Northern District of Texas, Lubbock Division.
The business groups maintain that the rule violates the First Amendment’s guarantee of freedom of speech and right of association. Also, according to the plaintiffs, the rule violates the Due Process Clause of the Fourteenth Amendment and the Regulatory Flexibility Act.
Previously, business owners were only required to report when outside counsel directly communicated with employees. Under the new rule, business owners will have to report any communication with legal counsel even if the matter ends there.
by Tom Woods, Chairman, National Association of Home Builders
The U.S. Department of Labor (DOL) on July 15 issued guidance regarding application of the criteria used to assess whether a worker is properly classified as an independent contractor under the Fair Labor Standards Act, which determines overtime, unemployment insurance and other obligations. Independent contractors are not covered under the act.
The test used under the FLSA is one of several used at the federal level to determine worker classification. The Internal Revenue Service, the National Labor Relations Act, and Employee Retirement Income Security ACT (ERISA), each use a different test to distinguish independent contractors from employees.
The DOL document does not appear to signal a shift or change in the law as it relates to how workers are classified as either employees or independent contractors. Rather, it clarifies the factors to be considered in making such a determination.
On its face, this “interpretation” does not appear to place any new or additional burdens on the industry. However, given the emphasis on the construction industry to date, and in the guidance document, NAHB will have to be vigilant in monitoring enforcement to determine how DOL is applying the “economic realities” test in the field. Arguably, the factors leave a lot of room for interpretation, and the document confirms there is clearly a bias towards worker status as employees.
We are also concerned that the Administration is too focused on enforcement and providing less individualized assistance to employers who are in need of compliance information. NAHB plans to urge Congress to use its oversight authority to ensure DOL hasn’t overstepped its boundaries.
NAHB has provided analysis on the DOL guidance to help you determine whether a worker is an independent contractor or employee.
We will continue to monitor this situation closely.