New Federal Overtime Rule Takes Effect

On July 1st, the U.S. Department of Labor’s new overtime rule went into effect in 49 states across the country. The new rule makes more salaried employees eligible for overtime by revising the threshold used to determine if lower-paid salaried employees are entitled to overtime pay when they work more than 40 hours in a week. Before the new rule went into effect, employees earning less than $35,568 were eligible for overtime. Now, under the new rule, the threshold has been increased to $43,888 through the rest of 2024 and will increase to $58,656 beginning January 1st, 2025. The Department of Labor will then update the threshold every 3 years to reflect current earning data. Acting Secretary of Labor Julie Su estimates that the new rule affect 1 million workers

Various business groups have strongly opposed the threshold increase, saying it will place new constraints on employers and will reduce flexibility for the employees who will be reclassified. It has also been argued that this could force companies to make choices that will limit job creation and job growth opportunities for employees.

Texas is currently the only state in the country where will this rule will not take effect after U.S. District County Judge Sean Jordan granted a preliminary injunction in a lawsuit that was brought by Texas Attorney General Ken Paxton. In the lawsuit, Paxton argued that the rule is an overreach by a federal agency that will increase the state’s payroll costs for public employees. When granting the preliminary injunction, Justice Jordan invoked the recent Supreme Court ruling overturning the Chevron doctrine, which previously required courts to defer to “permissible” agency interpretations of the statutes they administer. As of this writing, it is unknown whether similar lawsuits in other states have been filed.