Bloomberg reported that US District Judge Sean Jordan in Sherman, Texas, granted an injunction request on Friday, blocking the Biden administration's rule asserting it would drive up Texas' payroll cost and budget.
The Biden-Harris Administration's Overtime Pay Rule
The injunction is a major setback for the Biden-Harris administration rule, which only aims to expand overtime protections for millions of lower-paid salaried workers nationwide by increasing the thresholds required to ensure that those who contribute to America's economic prosperity are paid fairly.
By law, every US employee is entitled to overtime pay at a rate of time and a half for hours worked over 40 in a given week unless they qualify for exemption.
The new rule that the Biden administration proposes is being implemented in phases. Initially, the minimum salary threshold will increase from $35,568 to $43,888 on July 1, with a further rise scheduled for January 1, 2025, to $58,656. Subsequently, the rule mandates automatic increases to the threshold every three years, calculated based on a predetermined formula, according to NAHB.
READ ALSO: Lower-Paid Salaried Maine Workers Prioritized as Biden's Overtime Pay Rule Takes Effect July 1
Legal Challenges Being Weighed Ahead of Election
Further challenges are being brought by a coalition of business groups in the Eastern District, with another case pending in the Northern District. While many US businesses oppose the change as unaffordable, Texas, representing itself as an employer, argues that the adjustment would only increase payroll costs and potentially disrupt its budget.
Judge Jordan asserted that Texas is likely to succeed in proving that the new Biden overtime pay rule represents an unlawful exercise of power, where Texas would suffer irreparable harm without an injunction, Pinsent Mason reported.
Lawyer Scott Le Blanc, speaking with HRNews, is interested in seeing how this situation develops, especially ahead of the change in leadership in November. Similar to the non-compete rule, Le Blanc believes this regulation may encounter legal challenges that could lead to its invalidation.
Most clients who treat employees as exempt already pay them at least $43,000, if not $58,000, annually. Usually, it is not the minimum salary requirement but the duties part of the test that causes employee issues. However, a notable feature of this Biden administration rule is the introduction of an automatic escalator clause that will trigger continued increases to that threshold every three years or so.
Jordan said during a hearing that the US Department of Labor may have violated federal wage law by determining eligibility for overtime pay based on salaried workers' wages rather than their job duties.
When an employee meets the duties test for exempt status but does not meet the new minimum salary threshold, employers can either raise the employee's salary to meet the minimum salary requirement or convert exempt employees to non-exempt status, where they would need to start tracking their hours worked and be paid overtime for any hours worked over 40 in a week, Le Blanc suggests.
