Second Texas Federal Judge Rejects Biden Overtime Expansion Rule

A Texas federal judge rejected a US Labor Department rule that would have expanded overtime protections to 4 million new workers, marking the second major court loss for the Biden administration on the regulation.

Judge Sam Cummings of the US District Court for the Northern District of Texas agreed Monday with software company Flint Avenue LLC’s argument that the rule went beyond the labor agency’s authority under federal labor law.

The decision comes after another federal judge in the Eastern District of Texas in November blocked the rule from going into effect nationwide.

That judge granted summary judgment in favor of the State of Texas and a coalition of business groups, agreeing that the DOL overstepped its authority and that the policy would drastically increase their payroll costs for employers. The DOL has since appealed that ruling to the Fifth Circuit.

In Monday’s order, Cummings said that Eastern District’s recent decision and the evidence presented in this case before him support granting summary judgment to the Texas-based software company that challenged the pay mandate.

The rule, released in April, sought to update an exemption to overtime pay requirements so that workers making less than $58,656 a year would be automatically eligible for overtime pay anytime they worked more than 40 hours a week.

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

The rule would also update that salary threshold every three years.

The first phase of the rule, which went into effect in July, boosted the threshold for overtime eligibility to $43,888, up from its current $35,568. That number was then supposed to increase to $58,656 on Jan. 1.

Flint Avenue sued over the rule in June, arguing it would be prevented from compensating workers as preferred.

The move to fully block the rule came after Cummings denied Flint Avenue’s request for an emergency injunction to freeze it before it went into effect earlier this year. At the time, Cummings said Flint Avenue had backtracked on its allegation that the July 1 change would impact one of its employees.

“Two federal courts have now struck down the Department’s one-size-fits-all salary rule, which would have forced small businesses nationwide to reclassify white-collar employees and take away their flexible work arrangements,” Sheng Li, litigation counsel at the New Civil Liberties Alliance, which represents the company, said in a statement.

The DOL didn’t immediately respond to a request for comment.

The case is Flint Avenue LLC v. US DOL, N.D. Tex., No. 24-00130, summary judgment denied on 12/30/24.