The U.S. Department of Labor’s new overtime rule, which took effect Monday, will make more salaried employees eligible for overtime.
The rule revises the threshold used to determine if a lower-paid salaried employee is entitled to overtime pay for hours worked beyond a 40-hour week. Previously, salaried workers earning less than $35,568 per year were eligible for overtime, but now that threshold is $43,888 per year and will increase to $58,656 on Jan. 1, 2025.
After that date, the DOL will update the threshold every three years to reflect current earnings data, thereby making even more salaried employees eligible for overtime.
U.S. Acting Secretary of Labor Julie Su said Monday the new rule will affect an estimated 1 million workers nationwide.
Business groups, including the National Association of Manufacturers, have strongly opposed the changes, arguing they place new constraints on employers, reduce flexibility for the workers who will be reclassified and could potentially force companies to make painful choices that limit both job creation and growth opportunities available to employees.
The DOL rule change also revised a different threshold applied to white-collar employees working in executive, administrative, professional, and outside sales positions. Previously, these employees had been eligible for overtime if they earned less than $107,432 per year. Now the threshold is $132,964 per year and will increase again to $151,164 on Jan. 1, 2025, thereby making more professional salaried employees eligible for overtime.
The nationwide changes to the rules promulgated by DOL under the Fair Labor Standards Act change are now in effect in all 50 states except Texas.
On Friday, a U.S. District Court judge in Texas granted a preliminary injunction in a lawsuit brought by the Texas attorney general that argued the new overtime thresholds were an overreach by a federal agency that will drive up the state’s payroll costs for public employees.
U.S. District Court Judge Sean Jordan invoked the U.S. Supreme Court’s recent action overturning the so-called Chevron doctrine, which for decades has required courts to defer to “permissible” agency interpretations of the statutes they administer. Jordan wrote that he granted the temporary preliminary injunction because the State of Texas is likely to succeed at trial in proving that the DOL had overstepped its rulemaking authority.
The preliminary injunction is limited to Texas public workers and does not apply to the employees of private companies in Texas.
