Federal Judge Strikes Down Biden Overtime Pay Rule

A federal judge in Texas permanently blocked a Biden administration rule that would have made about 4 million more salaried U.S. workers eligible for overtime pay. U.S. District Judge Sean Jordan in Sherman, Texas, said the U.S. Department of Labor rule that took effect in July improperly bases eligibility for overtime pay on workers’ wages rather than their job duties.

The state of Texas and business groups representing a range of industries had filed lawsuits challenging the rule, which had been consolidated.

Jordan, who was appointed by Republican President-elect Donald Trump in his first term, struck down the rule in mid-November after saying in June that it was likely invalid and temporarily blocking it from being applied to Texas state employees.

The rule would have required employers to pay overtime premiums to salaried workers who earn less than $1,128 per week, or about $58,600 per year, when they work more than 40 hours in a week, beginning Jan. 1, 2025, and it had temporarily raised the threshold to about $44,000 per year on July 1. The previous threshold of about $35,500, which was set in 2019, will now be back in effect.

The Labor Department and the office of Republican Texas Attorney General Ken Paxton did not immediately respond to requests for comment.

David French, executive vice president of the National Retail Federation, one of the groups that sued, said the rule would have curtailed retailers’ ability to offer greater benefits to lower-level salaried employees.

The Labor Department can seek review of the ruling in the New Orleans-based 5th U.S. Circuit Court of Appeals, which is widely regarded as the most conservative federal appeals court. But the incoming Trump administration could abandon any attempt to revive the rule.

Federal law exempts workers with “executive, administrative, and professional” (EAP) duties from receiving overtime pay, and the Labor Department has for decades used salary as one factor in deciding when that applies.

The Labor Department, in adopting the rule, said that lower-paid salaried workers often do the same jobs as hourly employees, but work more hours for no additional pay. The rule also established automatic increases in the salary threshold every three years to reflect wage growth.

Jordan agreed with Texas and the business groups that by substantially raising the salary level, the rule improperly jettisoned the duties requirement written into federal law. “The Department may impose some limitations on the scope of the EAP Exemption’s operative terms, but it cannot enact rules that replace or swallow the meaning those terms have,” Jordan wrote.