Keeping current with the many federal and state laws and regulations that affect your business, such as the overtime rule, can be challenging. A Fort Lauderdale business transactions lawyer at Kramer Green can answer your legal questions and give you the advice you need to help you successfully operate and build your business. We can also provide ongoing counsel to keep you up to date on changes in laws, regulations, and policies that impact your business. Together, we will ensure that you have the legal knowledge and tools to build and safeguard your business.
A Texas federal court has struck down the Biden administration’s new overtime rule that would have provided overtime benefits for about four million new workers. Judge Sean D. Jordan of the U.S. District Court for the Eastern District of Texas ruled that changes to the salary threshold for the white-collar exemptions from overtime exceeded the statutory authority of the U.S. Department of Labor (DOL). The court also found that the rule’s automatic increases to the salary threshold in the future violated the Administrative Procedure Act.
The court previously issued a preliminary injunction that affected only Texas state employees, but the court’s most recent ruling applies nationwide. According to the court, the increase in the salary threshold was so high that it rendered the other eligibility requirement for the exemptions – the so-called “duties test” – irrelevant.
The overtime rule, which partially went into effect on July 1, 2024, altered the test that employers use to classify employees as exempt or nonexempt for the purposes of overtime pay. Under the Fair Labor Standards Act (FLSA), nonexempt employers are entitled to time-and-a-half pay for every hour worked over 40 hours in a week. However, some white-collar workers can be exempt from overtime pay if they receive a yearly salary that exceeds a certain threshold. To qualify for an exemption, workers also must meet a duties test, which examines whether they work in a bona fide executive, administrative, or professional capacity.
The new rule increased the salary threshold for exemptions to $43,888.00 on July 1, 2024. The second phase of the rule was scheduled to take effect on January 1, 2025, which would have increased the salary threshold to $58,656. The rule also called for automatic increases to the salary threshold every three years. The increases represented a move from the 20th percentile of the weekly earnings of salaried full-time workers in the lowest-wage census region to the 35th percentile of earnings.
The State of Texas and a coalition of business groups sued the Biden administration over the rule, claiming that the move would significantly increase payroll costs for workers and result in fewer jobs for workers. The plaintiffs’ legal arguments mirrored those that led to the same court overturning a similar expansion of the overtime rule during the Obama administration in 2017. Although the Biden administration was careful to consider the court’s previous ruling in crafting the 2024 rule, its efforts were not enough to convince the court to uphold the rule.
The case is Texas v. DOL, E.D. Tex., No. 24-00499 (Nov. 15, 2024).
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