Overtime Rule Blocked for State of Texas Ahead of July 1 Launch

A Texas federal judge temporarily halted implementation of the US Labor Department’s new overtime rule for the state of Texas just before it was set to go into effect July 1—a win for the state which had said the change would drive up payroll costs and destroy its budget.

Judge Sean D. Jordan of the US District Court for the Eastern District of Texas granted Texas’ request for an injunction on Friday. The state said costs from the new rule would result in fewer jobs for state employees and cuts to other state services.

However, the emergency relief is limited to the state of Texas as an employer only.

“In sum, Texas has established that all factors weigh in favor of granting a preliminary injunction,” Jordan wrote. “Texas is likely to succeed in showing that the 2024 Rule is an unlawful exercise of power, Texas will be irreparably harmed absent an injunction, and the balance of equities and the public interest favor preventing unlawful agency action.”

The decision is a partial blow to the DOL, which said the rule was needed to ensure the lowest earning workers were being paid fairly for their time. The rule, one of the Biden administration’s major employment policy wins, is expected to expand time-and-a-half pay protections to 4 million workers who were previously ineligible.

The state of Texas had less than 100 employees that it estimated would be impacted by the July 1 raise.

Under the Fair Labor Standards Act, certain “white-collar” workers can be exempt from overtime pay requirements if they are salaried, make more than a certain amount each year, and work in a “bona fide executive, administrative, or professional capacity.”

The new rule, released in April, would update the salary portion of the test so that workers making less than $58,656 a year would be automatically eligible for overtime pay any time they worked more than 40 hours a week. It also would update that salary threshold every three years.

The first phase of the rule, originally scheduled for July 1, would have increased the salary threshold for overtime eligibility to $43,888 from its current $35,568. That number was then scheduled to go all the way up to $58,656 on Jan. 1.

The state of Texas case has been consolidated with a challenge brought by a coalition of business groups in the Eastern District, the judge also said Friday.

Another legal challenge is currently pending against the rule in the Northern District of Texas.

The case is State of Texas v. DOL, E.D. Tex., No. 4:24-cv-00499, injunction granted 6/28/24.