Judge Strikes Down New Salary Overtime Rule: What Employers Need to Know
November 18, 2024
Article Summary
- A Texas judge has reverted the salary overtime rule to 2019 levels of $35,568.
- The 2025 increase to $58,656, proposed by the Biden administration, has been blocked.
- Employers must now navigate these changes to remain compliant with federal laws.
The Latest on the Salary Overtime Rule in Texas
A recent federal court ruling in Texas has reset the salary overtime exemption threshold to the 2019 level of $35,568. The decision, made by U.S. District Judge Sean Jordan, blocked a rule enacted by the Department of Labor (DOL) earlier this year under the Biden administration, which sought to increase the threshold to $58,656 by 2025. This ruling significantly impacts employers and employees, particularly those who were anticipating expanded overtime eligibility.
What Was the Biden Administration’s Proposed Rule?
Earlier this year, the DOL announced plans to raise the salary threshold for overtime exemption. Employees earning less than $58,656 annually would have become eligible for overtime pay if they worked more than 40 hours a week. The increase aimed to address wage disparities and ensure that lower-paid salaried workers receive compensation similar to their hourly counterparts for overtime hours. According to the DOL, this threshold was designed after extensive input from employees, unions, and businesses (U.S. Department of Labor).
However, the proposal faced backlash from business groups and the state of Texas, leading to multiple lawsuits challenging the DOL’s authority.
Why Did the Court Block the New Rule?
Judge Jordan ruled that the DOL exceeded its authority by setting a salary-based exemption threshold without sufficient focus on job duties. The court emphasized that such regulations should be based on the nature of the work performed rather than salary levels alone. As a result, the salary threshold has reverted to the Trump-era level of $35,568, which was implemented in 2019.
This ruling has stalled the planned increase, leaving businesses and employees in limbo about future overtime eligibility rules. For further legal context, refer to the Texas Workforce Commission.
What Does This Mean for Employers?
Employers must now adapt their payroll and overtime practices to comply with the restored 2019 salary threshold of $35,568. Here’s what businesses need to know:
- Review Employee Classifications: Ensure that employees are correctly classified as exempt or non-exempt based on the current threshold and their job duties.
- Update Payroll Systems: Adjust payroll systems to align with the 2019 salary overtime rule and avoid non-compliance penalties.
- Monitor Future Developments: Keep an eye on potential appeals or legislative actions that could alter the threshold again.
Businesses operating in Texas should remain particularly vigilant, as legal challenges to federal labor regulations often originate in the state.
How Does This Impact Employees?
For employees, this decision means that millions of workers who expected to become eligible for overtime pay under the Biden administration’s proposed rule will no longer qualify. Those earning between $35,568 and $58,656 annually will remain exempt, provided their job duties meet exemption criteria.
While this ruling is a setback for expanded overtime protections, employees should still discuss potential pay structure concerns with their HR departments.
How The Texas HR Outsourcing Firm at The Unit Consulting Can Help
Navigating the complexities of changing federal labor laws like the salary overtime rule can be challenging for businesses. At The Unit Consulting, we specialize in helping employers stay compliant with federal and state employment laws. Whether you need to reassess employee classifications, update your payroll systems, or develop compliant HR policies, we’re here to simplify the process.
Don’t risk penalties for non-compliance. Contact The HR Experts at The Unit Consulting today to ensure your business remains compliant and your workforce is managed effectively.
