A federal judge in Texas has permanently blocked a Biden administration rule that would have extended overtime pay eligibility to approximately 4 million additional salaried workers. US District Judge Sean Jordan ruled that the Department of Labor's regulation, which took effect in July, improperly determined eligibility based on wages rather than job duties.
The lawsuit, initiated by the state of Texas and various business groups, contested the rule's implementation. Judge Jordan had previously indicated the rule's potential invalidity and had temporarily halted its application to Texas state employees.
The blocked rule aimed to mandate overtime premiums for salaried workers earning less than $1,128 per week, equating to about $58,600 annually, for hours worked beyond 40 in a week, starting January 1, 2025. The threshold had been temporarily increased to around $44,000 per year since July 1, but the previous threshold of approximately $35,500, established in 2019, will now be reinstated.
The Labor Department and Texas Attorney General Ken Paxton's office did not provide immediate comments on the ruling. David French, executive vice president of the National Retail Federation, one of the plaintiffs, argued that the rule would have limited retailers' capacity to enhance benefits for lower-level salaried employees.
The Labor Department may appeal the ruling in the 5th US Circuit Court of Appeals, known for its conservative stance. However, the incoming Trump administration might choose not to pursue the revival of the rule.
Historically, federal law exempts workers with executive, administrative, and professional duties from receiving overtime pay, with the Labor Department using salary as a key factor in determining this exemption. In adopting the now-blocked rule, the Labor Department highlighted that lower-paid salaried workers frequently perform similar tasks to hourly employees but often work longer hours without additional compensation. The rule also proposed automatic salary threshold increases every three years to align with wage growth.
Judge Jordan concurred with the plaintiffs that the rule's substantial salary increase disregarded the established duties requirement outlined in federal law, stating that while the Department may impose some limitations, it cannot enact rules that undermine the fundamental meaning of these terms.