Court to Decide Fate of Overtime Pay Increase for Millions

A coalition of prominent business groups has filed a lawsuit against the Biden administration’s new overtime pay regulation.  

The rule, set to take effect in 2024, extends mandatory overtime pay to an additional 4 million workers by raising the salary threshold for exemption to $58,600 annually. 

Reuters reports that the lawsuit was filed in the U.S. District Court for the Eastern District of Texas — a jurisdiction known for its previous rulings on similar matters.  

The business groups argue that the U.S. Department of Labor lacks the authority to implement such a sweeping change and warn that the rule could force businesses to cut jobs and limit workers’ hours.  

More specifically, the Insurance Journal reports that the rule mandates employers must pay overtime premiums to workers earning less than $1,128 per week — or about $58,600 per year — if they work more than 40 hours in a week.  

The current pay threshold, set by the Trump administration in 2020, stands at approximately $35,500 per year. 

It’s reported that advocacy groups have criticized this threshold as insufficient — arguing that it does not cover enough workers. 

The lawsuit includes the National Federation of Independent Business, the International Franchise Association, and the National Retail Federation. These groups contend that the costs of complying with the new rule will disproportionately affect smaller employers and non-profits operating on fixed budgets, potentially leading to cuts in critical programming, staffing, and public services. 

The business groups argue that the new rule repeats the errors of the 2016 rule and fails to address the flaws previously identified by the court.  

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

This legal battle showcases the ongoing tension between government efforts to protect workers’ rights and business concerns about regulatory overreach. As the case progresses, it will be closely watched by both labor advocates and business leaders, given its potential to influence the American labor laws.