Biden overtime pay rule challenged by US business groups

By Daniel Wiessner

(Reuters) – A coalition of U.S. business groups filed a lawsuit seeking to block a Biden administration rule that would extend mandatory overtime pay to 4 million workers, saying it went too far.

The groups filed a lawsuit in federal court in Sherman, Texas, on Wednesday evening, saying the U.S. Department of Labor lacked the authority to adopt the rule and that it would force companies to cut jobs and limit workers’ working hours.

The rule would require employers to pay overtime premiums to workers who earn wages below $1,128 per week, or about $58,600 per year, when they work more than 40 hours per week.

The current threshold of about $35,500 a year was set by the Trump administration in a 2020 rule that advocacy groups and many Democrats say does not cover enough workers.

The business groups involved in the lawsuit said the costs of complying with the new rule “will force many small employers and nonprofits operating on fixed budgets to reduce their programs, staffing levels and essential services to the audience”.

The Labor Ministry declined to comment. In adopting the rule, the agency said lower-paid salaried workers often do the same work as their hourly counterparts, but work more hours without additional pay.

Groups involved in the lawsuit include the National Federation of Independent Business, the International Franchise Association and the National Retail Federation.

The case was assigned to U.S. District Judge Sean Jordan, appointed by former Republican President Donald Trump.

Sherman’s only other judge, U.S. District Judge Amos Mazzant, blocked a rule in 2017 that would have raised the overtime pay threshold to about $47,000.

Mazzant said the threshold was so high that it would result in some managerial employees who are not entitled to overtime pay under federal wage law.

“The Department’s 2024 Overtime Rule largely repeats the errors of the 2016 Rule and fails to remedy the flaws previously identified by this Court,” the business groups said in their lawsuit.

Under the new rule, the salary threshold will increase to $43,888 on July 1 and to $58,656 on January 1, 2025. And starting in 2027, the threshold will automatically increase every three years to reflect changes in average earnings .

(Reporting by Daniel Wiessner in Albany, New York; editing by Kirsten Donovan, William Maclean)