A federal judge in Texas has blocked a new rule from the Biden administration that would have expanded overtime pay to millions more salaried workers across the U.S. The decision strikes down the planned increase in the overtime threshold, reverting it back to the previous level set under the Trump administration in 2019. Under the now-vacated rule, employers were required to pay overtime to staffers making $43,888 a year in certain executive, administrative, and professional roles as of July 1, 2024. This threshold was set to rise further to $58,656 a year on Jan.
1, 2025. However, with the judge’s ruling, the overtime threshold returns to $35,568. Many small business owners have reacted positively to the decision, citing the impact on managing labor costs and maintaining financial stability.
Guillaume Drew, founder of sustainable home goods company Or & Zon, said overturning the rule helps keep labor costs and prices down, particularly for future employees. Sheldon Sutherland, owner of epoxy flooring business Epoxy Werx, echoed this sentiment, stating, “As a small business, managing labor costs is critical, and the proposed change would have increased expenses significantly.”
Small business organizations also welcomed the ruling. John Arensmeyer, Founder & CEO of Small Business Majority, acknowledged that while the decision fails to account for inflation, the Department of Labor had tried to do too much too quickly.
Judge blocks Biden overtime rule
Karen Kerrigan, president & CEO of the Small Business & Entrepreneurship Council, added that the ruling would assist struggling small business owners by allowing them to align compensation with individual worker needs and the marketplace. However, not all small business owners agreed with the decision.
Stephanie Penn, owner of online t-shirt boutique Tee & Honey, argued that fair pay, including overtime, benefits morale and productivity. She expressed concern that striking down the rule places a heavier burden on businesses striving to do right by their employees while leaving room for inequities. Legal experts believe that while the Department of Labor has the right to appeal the decision, it is unlikely to succeed given the conservative stance of the 5th U.S. Circuit Court of Appeals.
With the upcoming change in administration, any appeal filed during the transition period is likely to be withdrawn. Employers who had already complied with the July 2024 changes by raising salaries or reclassifying employees may find it inadvisable to reverse these changes from an employee relations standpoint. However, organizations can shelve plans to reclassify employees or adjust salaries for January 2025, as the rule has been vacated well ahead of time.
Moving forward, employers should remain vigilant and stay informed on any further developments regarding federal overtime regulations.
