Biden overtime pay rule challenged by US business groups

By Daniel Wiessner

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

The groups filed a complaint in Sherman, Texas federal court late on Wednesday claiming the U.S. Department of Labor lacked the power to adopt the rule and that it would force businesses to cut jobs and limit workers’ hours.

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

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

The business groups in the lawsuit said the costs of complying with the new rule “will force many smaller employers and non-profits operating on fixed budgets to cut critical programming, staffing, and services to the public.”

The Labor Department declined to comment. In adopting the rule, the agency said that lower-paid salaried workers often do the same jobs as their hourly counterparts, but work more hours for no additional pay.

The 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, an appointee of Republican former President Donald Trump.

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

Mazzant said the cutoff was so high that it would sweep in some management 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 address 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 Jan. 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)