Business groups and state governments are seeking to halt the implementation of a new overtime rule announced earlier this year by the Obama administration.
The rule, which is scheduled to take effect on Dec. 1, will significantly raise salary threshold at which employees can be exempt from mandatory overtime pay when they work more than 40 hours in a week. The threshold will go up from $23,600 a year to $47,476, extending overtime to more than 4 million workers who were previously exempt, according to an estimate by the U.S. Department of Labor.
Twenty-one Republican-run states are suing over the rule change. They levy a number of objections against the rule change, including a provision that will lift the threshold every three years based on inflation, as well as the sheer size of the increase.
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The states also argue specifically that the sudden increase will negatively affect state and municipal budgets, undermining financial planning that states and cities have undertaken based on the current overtime rules.
"Once again, President Obama is trying to unilaterally rewrite the law," said Texas Attorney General Ken Paxton, the lead plaintiff in the suit. "And this time, it may lead to disastrous consequences for our economy."
A coalition of business groups, led by the U.S. Chamber of Commerce, is fighting the rule change in a separate legal challenge.
The Obama administration dismissed the lawsuit as legally baseless and defended the rule change as an essential boost for working Americans.
"I look forward to vigorously defending our efforts to give more hardworking people a meaningful chance to get by," said Labor Secretary Thomas Perez.
Raising the overtime threshold is not a new move. The last two presidents to have done so were both Republicans. President George W. Bush lifted it to the current level in 2004.
In past decades, a much larger percentage of U.S. workers received legally mandated overtime pay. For instance, the threshold in 1975 was 1.57 times the median U.S. wage, meaning that the majority of workers were below it. The equivalent threshold today would be $54,536 a year, according to research by economist Jared Bernstein, a former advisor to Vice President Joe Biden.
Employers, however, have mounted vociferous opposition to the change, saying that it will lead to them cutting hours of mid-level employees and denying them opportunities to learn and gain experience as managers.
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