Biden overtime rule overruled 

A Texas court last week threw out the Biden’s administration’s attempt to rewrite the rules for overtime. The court said that the Department of Labor (DOL) exceeded its authority by changing the rule in a way that usurped Congress’s role to write laws. The court’s decision echoed arguments made against the department’s rewrite by the Competitive Enterprise Institute’s experts. 

The ruling is good news for workers because it allows more flexibility in how they can set work arrangements with their employers. Workers who prefer to do their jobs at home and/or keep irregular hours will be able to work out deals with their employers that would have otherwise been prohibited by the Biden administration rule. 

The Fair Labor Standards Act (FLSA) says employees must be paid time-and-a-half once they work more than 40 hours in a week. However, businesses may exempt workers from the requirement if their duties are “managerial” in nature and they also reach a certain salary threshold. The DOL rule, which took effect in July, set the threshold at $44,000 annually, up from its prior level of $35,000. It would have raised the threshold to $59,000 starting next year. Further automatic increases were written into the law. 

Instead, the court vacated the DOL rule entirely, undoing all of its changes, meaning the threshold will now revert to $35,000. District Court Judge Sean Jordan said that DOL “exceeded the authority delegated by Congress” under the FLSA by making the threshold entirely about salary and ignoring other parts of the law that focused on the worker’s duties. The judge said the automatic increases in the threshold likewise exceeded the DOL’s authority.  

Both findings were predicted by CEI’s experts. “The standard salary level test has a dubious connection to the statute, which refers to the capacity in which employees are employed, not how much they are paid,” noted CEI attorney David McFadden, a former Labor Department lawyer, at the time the rule was proposed. The comment he submitted to DOL on the proposed rule argued that each automatic “update would be a rule that must be adopted through the notice and comment procedure of the Administrative Procedure Act rather than automatically.” 

The incoming Trump administration is not expected to revisit the Biden administration effort.  

The Biden administration’s purpose in revising the rule was to expand the number of people receiving overtime. The administration’s union allies and labor-sympathetic lawmakers have argued that companies abuse the exception by designating regular employees as managerial to get out of having to pay them overtime. Raising the threshold was intended to prevent this. 

This one-size-fits-all approach didn’t necessarily benefit all workers. Companies, especially smaller ones, frequently cannot afford to pay time-and –a-half. Workers willing to do the extra work in exchange for some other concession from their employers would have been out of luck. The court’s decision means they are once again free to innovate.