A federal judge in Texas has delivered a significant blow to the Biden administration's efforts to expand overtime pay for millions of salaried workers across the United States. On November 15, 2024, U.S. District Judge Sean Jordan permanently blocked the Department of Labor's new rule, which was projected to make approximately 4 million more salaried workers eligible for overtime pay. This ruling marks the latest development in the long-standing debate over employee rights and compensation.
The rule, which took effect this past July, sought to raise the income threshold under which salaried workers would be entitled to receive overtime pay for hours worked beyond the standard 40-hour work week. Under the now-blocked rule, workers earning less than $58,656 annually were to qualify for overtime, up from the previous threshold of $35,568 per year, which had been set under the Trump administration. This increase represented the most substantial adjustment to the cap for overtime eligibility since 2004.
According to the judge, the Department of Labor overstepped its authority by emphasizing salaries rather than the actual job duties performed by employees when deciding who would qualify for overtime. Judge Jordan's ruling sided with numerous organizations and the state of Texas, which argued the changes would disrupt businesses and fundamentally alter the employer-employee dynamic.
Jordan, appointed by former President Donald Trump, had previously issued a temporary block on the rule earlier this year. During those proceedings, he expressed skepticism about the legal grounds of the Department of Labor’s decision to prioritize wage levels over job functions.
The ruling has elicited mixed reactions. Proponents of the overtime expansion, including labor groups, argued the new rule was necessary to protect lower-paid salaried workers, many of whom perform the same duties as hourly employees but were not compensated for their extra hours. Julie Su, the acting Secretary of Labor at the time, had emphasized the need to raise the salary threshold to reflect current wage conditions, stating it was unfair for salaried workers to work additional hours without extra pay.
On the flip side, opponents, including the National Retail Federation and other business coalitions, warned it could create financial burdens for employers, forcing them to either cut jobs or reduce working hours to manage costs effectively. David French, executive vice president of government relations for the National Retail Federation, voiced concerns, stating, "The changes would have curtailed retailers' ability to offer the most flexible, generous, and tailor-made benefits packages to lower-level exempt employees across the industry." He argued the industry had to retain the flexibility to offer competitive compensation packages without the risk of being overwhelmed by new mandated pay structures.
This decision also reflects the broader political climate surrounding labor rights and compensation, with sharp divisions between business interests and worker advocates. Previous attempts to revise overtime regulations under the Obama administration had similarly met resistance, culminating in their eventual rejection by the courts. The Obama-era rule aimed to expand overtime eligibility to millions more workers but was successfully challenged and overturned by business interests.
Now, with the 2019 threshold reinstated, there are looming concerns about how new changes — if contemplated — under the incoming Republican administration could affect the current state of wage regulation. It remains unclear whether the Labor Department will seek to appeal Jordan’s ruling, which now puts the onus on them to either maintain their push for the new rule or adapt their strategy moving forward.
Judge Jordan's ruling arrives amid heightened scrutiny of the federal labor department's regulatory authority and its capacity to effect change within industries consistently arguing for deregulation and reduced government intervention. The future of labor rights and compensation remains uncertain as various stakeholders regroup following this unexpected setback.
