The NAHB has joined a coalition of business groups, including the Associated Builders and Contractors and the National Association of Wholesale Distributors, in a lawsuit challenging the recent changes to the Department of Labor’s overtime rules.

Under the U.S. Department of Labor’s (DOL) new overtime rules, the salary threshold for determining overtime pay requirements will increase to $43,888 from $35,568, effective July 1, 2024. The threshold will increase to $58,656 on Jan. 1. Beginning July 1, 2027, salary levels will update every three years using up-to-date wage data.

Under the Fair Labor Standards Act (FLSA), employers must pay overtime wages for time worked beyond 40 hours each week. However, employees who perform bona fide executive, administrative, or professional duties are exempt from overtime pay requirements. The DOL’s criteria for whether an employee is exempt from overtime rules includes receiving a salary that does not vary based on the quantity or quality of work, receiving a salary above the established minimum, and performing primarily executive, administrative, or professional duties.

The lawsuit against the overtime rules was filed in the U.S. District Court for the Eastern District of Texas, alleging the DOL exceeded its statutory authority and “acted arbitrarily and capriciously.” The suit claims the 2024 rule will deprive millions of employees of their exempt status and makes “salary rather than an employee’s duties” determinative of whether an employee should be exempt from overtime pay.

“Many employers will lose the ability to effectively and flexibly manage their workforces upon losing the exemption for frontline executives, administrators, and professionals,” the lawsuit asserts. “Millions of employees across the country will have to be reclassified from salaried to hourly workers, resulting in restricted work hours that will deny them opportunities for advancement and hinder their job performance—to the detriment of their employers, their customers, and their own careers.”

The NAHB says the salary increase in the 2024 rule “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.”

When the DOL issued the proposed rule in 2023, the NAHB submitted a letter in opposition, noting that it would “result in undue hardship and place a large economic burden on businesses in certain low-cost areas.” The NAHB said a one-size-fits-all approach to overtime rules was “inappropriate” for many industries, including home building, and different regions of the country.