A Texas federal judge has struck down a US Department of Labor rule that would have expanded overtime eligibility to four million new workers. The new rule, which began July 1, was issued under the Biden administration and tweaked the test used to determine whether a worker should be subject to an exemption to overtime pay requirements.

Judge Sean D. Jordan of the US District Court for the Eastern District of Texas granted summary judgment against the rule Friday, finding that it went beyond the agency’s authority and exceeded its statutory jurisdiction.

The decision is a win for the State of Texas and a coalition of business groups who sued over the rule, arguing that the policy would drastically increase payroll costs for employers, resulting in fewer jobs and fewer shifts for workers. This order now applies nationwide.

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 Biden rule updated 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 DOL said the rule was necessary to ensure the lowest earning workers were being properly paid for their time.

Ultimately, the court found that the overtime rule set the salary piece of the test so high it made other pieces of the analysis irrelevant, like the consideration of a worker’s job duties. That same legal argument was used by Eastern District of Texas to sink an Obama-era DOL rule in 2017, that similarly sought to expand overtime pay eligibility to more workers.

The court ruling landed just weeks before the second and largest phase of the rule was due to take effect on Jan. 1.

The first phase of the rule, which went into effect July 1, 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 in the new year.

RCPA will continue to apprise members of any updates related to the FLSA overtime regulation as more details emerge, including potential retroactivity as well as responses from the Federal Department of Labor and State entities.