In a ruling issued on Friday, November 15, a federal judge in Texas overturned a U.S. Department of Labor rule that would have made about 4 million more salaried workers eligible for overtime compensation.
The rule, implemented under the Fair Labor Standards Act, took effect in July. But U.S. District Judge Sean Jordan blocked it, concluding that it’s improperly based on workers’ salaries instead of their job duties, as Reuters reported.
The judge handed a win to the state of Texas and a coalition of business groups that included the Restaurant Law Center, the Texas Restaurant Association and the National Retail Federation. They argued against the rule, which would have increased the overtime threshold to include all employees making up to $58,656 a year while triggering automatic increases in the future. The rule temporarily raised that threshold to about $44,000 per year on July 1.
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National Restaurant Association President and CEO Michelle Korsmo hailed the judge’s decision as “a win for restaurant operators and their business viability.”
“During the past five years, the average operator’s labor costs have gone up more than 30%,” Korsmo said in a statement. “The challenge to recruit talented managers is already pushing salaries higher, ensuring that good employees are making more through increases happening in the marketplace, in a more manageable manner for operators.
“We’re pleased the court agreed with our concerns about how the DoL’s one-size-fits all rule was an unlawful exercise of the agency’s power that would have significantly driven up costs for business owners and consumers.”
David French, executive vice president of the National Retail Federation, told Reuters that the rule also would have made it harder for retailers to offer improved benefits to lower-level salaried employees.
The Labor Department has argued that lower-level salaried employees often do the same work as hourly employees but unfairly have to work more hours without additional pay.
The ruling can be challenged in New Orleans’ 5th U.S. Circuit Court of Appeals, but that seems unlikely with the new Trump administration taking office next year, Reuters pointed out.
