Texas Judge Tosses Biden Overtime Expansion for Millions (2)

A Texas federal judge has struck down a US Department of Labor rule that would have expanded overtime eligibility to four million new workers, kneecapping one of the Biden administration’s most substantial labor policies.

Judge Sean D. Jordan of the US District Court for the Eastern District of Texas granted summary judgment against the rule Friday, finding that it went beyond the agency’s authority.

“The Department’s changes to the minimum salary level in the 2024 Rule exceed its statutory jurisdiction,” wrote Jordan, a Trump appointee.

The decision is a win for the State of Texas and a coalition of business groups that sued over the rule, arguing that the policy would drastically increase payroll costs for employers, resulting in fewer jobs and fewer shifts for workers.

The National Retail Federation, one of the multiple business plaintiffs that brought the suit, said the rule would have “forced employers to reexamine compensation packages for millions of workers nationwide.”

“The rules, if finalized, would have curtailed retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry,” NRF Executive Vice President of Government Relations David French said in a statement.

Biden Rule

The rule, issued by the Biden administration earlier this year, tweaked the test used to determine whether a worker should be subject to an exemption to overtime pay requirements.

Under the Fair Labor Standards Act, certain “white-collar” workers can be exempt from overtime pay if they are salaried, make more than a certain amount each year, and work in a “bona fide executive, administrative, or professional capacity.”

The new Biden rule updated the salary portion of the test so that workers making less than $58,656 a year would be automatically eligible for overtime pay any time they worked more than 40 hours a week. It also would update that salary threshold every three years.

The DOL said the rule was necessary to ensure the lowest earning workers were being properly paid for their time.

Jordan’s decision will likely draw concerns from worker advocacy groups, which had applauded the rule as a necessary update to ensure that overtime standards were keeping in line with cost of living and earnings changes over time. The left-leaning National Employment Law Project also said the rule would have resulted in either higher earnings for workers through overtime premium pay or employers limiting their employees’ workweeks to 40 hours.

Failed Precedent

Ultimately, Jordan found that the overtime rule set the salary piece of the exemption test so high it made other pieces of the analysis irrelevant, like the consideration of a workers’ job duties. That same legal argument was used by the Eastern District of Texas to sink an Obama-era DOL rule in 2017 that similarly sought to expand overtime pay eligibility to more workers.

“The minimum salary level imposed by the 2024 Rule ‘effectively eliminates’ consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties,” Jordan wrote, “in favor of what amounts to a salary-only test.”

The court ruling landed just weeks before the second and largest phase of the rule was due to take effect on Jan. 1.

The first phase of the rule, which went into effect July 1, increased the salary threshold for overtime eligibility to $43,888 from its current $35,568. That number was then scheduled to go all the way up to $58,656 in the new year.

Jordan in June blocked the rule from taking effect for Texas just ahead of the rule’s first boost, finding that the state was “likely to succeed in showing that the 2024 Rule is an unlawful exercise of power.”

Jordan’s latest order applies nationwide.

“Unlike at the preliminary-injunction stage when the Court had broad discretion to fashion appropriate preliminary relief, the Fifth Circuit has made clear that district courts should generally ‘nullify and revoke’ illegal agency action,” Jordan wrote. “Considering the volume and variety of the trade organizations’ members who are entitled to relief, it would be impractical, if not impossible, to fashion party-tailored relief here.”

The case is Texas v. DOL, E.D. Tex., No. 24-00499, summary judgment granted on 11/15/24.