NAHB Joins Lawsuit Challenging Department of Labor's New Overtime Rule

NAHB has joined a coalition of business groups in a lawsuit challenging recent changes to the Department of Labor’s overtime rules.

The complaint, filed in the U.S. District Court for the Eastern District of Texas, alleges that the Department of Labor (DOL) exceeded its statutory authority and acted arbitrarily and capriciously.

Under the Fair Labor Standards Act (FLSA), employers must pay their employees overtime wages for time worked beyond 40 hours each week. However, employees who perform bona fide executive, administrative or professional duties are exempt from the overtime pay requirements under the FLSA.

The DOL relies on a three-part test to determine whether an employee is exempt from overtime rules. To be exempt, the employee must:

1. Receive a salary that does not vary based on the quantity or quality of their work;
2. Receive a salary above an established minimum amount; and
3. Perform primarily executive, administrative or professional duties.

Under the new rule, effective July 1, 2024, the salary threshold will increase from $35,568 to $43,888, and then to $58,656 on Jan. 1, 2025, marking a nearly 65% increase from the current salary threshold. Also, beginning July 1, 2027, salary levels will increase every three years automatically using updated wage data, and these triennial salary level increases will happen without a notice and comment period.

NAHB joined the coalition and lawsuit to prevent DOL from exempting itself from the notice and comment process, which would establish a dangerous precedent for other executive agencies.

Regulated parties often provide valuable knowledge and insight that improve final rules. Moreover, if agencies can issue and enforce new rules that have never been open for public inspection and comment, regulated parties have fewer opportunities to hold agencies responsible.

Additionally, this salary increase is so excessive that it overwhelms the original intent of the overtime exemption, which was to exempt employees in executive, administrative and professional jobs from overtime pay requirements. DOL created the salary level component through regulation to serve as a proxy for serious inquiry into the duties each employee performs. The salary level component of the test did not come from the FLSA, and by raising the salary threshold high enough to overwhelm the rest of the test, DOL is attempting to override the intent of Congress.

While the lawsuit is in process, NAHB is holding a free webinar on Wednesday, June 26, at 1 p.m. ET to better help members understand their obligations under the new rules.