By Daniel Wiessner
(Reuters) – A federal judge in Texas on Friday permanently blocked a Biden administration rule that would have made about 4 million additional U.S. workers eligible for overtime pay.
U.S. District Judge Sean Jordan in Sherman, Texas, said the U.S. Department of Labor rule, which took effect in July, improperly bases overtime eligibility on employees’ 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 during his first term, scrapped the rule after saying in June that it was likely invalid and temporarily blocking its application to state employees in Texas.
The rule would have required employers to pay overtime premiums to employees who earn less than $1,128 per week, or about $58,600 per year, when working more than 40 hours per week, effective January 1, 2025, and temporarily increased the rule . the threshold to approximately $44,000 per year on July 1.
The previous threshold of approximately $35,500, which was set in 2019, is now back in effect.
The Department of Labor and Republican Texas Attorney General Ken Paxton’s office did not immediately respond to requests for comment.
David French, executive vice president of the National Retail Federation, one of the groups that filed a lawsuit, said the rule would have curtailed retailers’ ability to provide greater benefits to lower-level workers.
The Labor Department could seek review of the ruling from the New Orleans-based 5th U.S. Circuit Court of Appeals, widely considered the most conservative federal appeals court. But the new Trump administration could abandon any effort to revive the rule.
Federal law exempts employees with “executive, administrative and professional” (EAP) duties from receiving overtime pay, and the Department of Labor has used salary as a factor in deciding when that applies for decades.
The Labor Department said in adopting the rule that lower-wage workers often do the same work as hourly workers but work longer hours without additional pay. The rule also provided for automatic increases in the salary threshold every three years to reflect wage growth.
Jordan agreed Friday with Texas and the business groups that by substantially increasing the salary level, the rule improperly jettisoned duties under federal law.
“The Department may impose some limitations on the scope of the operational terms of the EAP exemption, but it cannot promulgate rules that replace or consume the meaning of those terms,” Jordan wrote.
(Reporting by Daniel Wiessner in Albany, New York; Editing by Alexia Garamfalvi and Leslie Adler)
