Business Groups Challenge New Overtime Rule

Several business associations have filed a lawsuit in the U.S. District Court for the Eastern District of Texas, challenging the Department of Labor’s new overtime rule. The plaintiffs, including the American Hotel and Lodging Association, the Associated Builders and Contractors, the National Association of Convenience Stores, the National Association of Home Builders, and the National Retail Federation, argue that the rule oversteps federal authority and would negatively impact businesses by forcing job cuts and reduced worker hours.

The contested rule changes the requirements for overtime pay for certain employees, raising the threshold for coverage of overtime pay for those employees earning less than $1,128 per week (about $58,600 annually) for any hours worked over 40 per week. This new threshold significantly raises the current limit of approximately $35,500 per year, set by the Trump administration in 2020—a threshold criticized by advocacy groups and many Democrats for being too low.

Filed last week in Sherman, Texas, the complaint contends that the Department of Labor lacks the authority to enforce the rule and emphasizes the economic strain it could impose on businesses. The case has been assigned to U.S. District Judge Sean Jordan, a Trump appointee. Notably, Judge Amos Mazzant, the only other judge in Sherman, previously blocked a similar 2016 rule, which sought to raise the overtime salary threshold to about $47,000, on the grounds that it exceeded the agency’s authority.

The business groups assert that the 2024 rule mirrors the errors of the 2016 rule and fails to address the flaws previously identified by the court. The new rule is scheduled to raise the salary threshold to $43,888 on July 1, 2024, and to $58,656 on January 1, 2025. Additionally, starting in 2027, the threshold will automatically adjust every three years to reflect changes in average earnings.