Judge Strikes Down Overtime Rule

Small business owners have expressed mixed but largely optimistic reactions to a recent decision by a federal judge in Texas to block a proposed overtime rule, a move that has major implications for employers and employees across the country.

The proposed rule, introduced by the Biden administration, aimed to broaden access to overtime pay for millions of salaried workers. Currently, nearly all hourly employees in the U.S. qualify for overtime pay after working more than 40 hours a week. Many salaried workers, however, are exempt from this requirement unless their annual earnings fall below a certain threshold.

The now-overturned rule would have significantly raised the salary cap for overtime pay eligibility—a change the U.S. hasn’t seen in decades. Employers were required as of July 1 to pay overtime to salaried employees earning less than $43,888 annually in certain executive, administrative, or professional roles. Under the new rule, set to take effect on Jan. 1, that threshold would have risen to $58,656, significantly expanding coverage. However, following the court’s decision, the previous threshold of $35,568, enacted under the Trump administration in 2019, remains the standard.

The judge’s rationale? The Department of Labor, in the court’s view, cannot prioritize wage eligibility over the specific duties of the job when determining whether employees qualify for overtime pay.

Perhaps the broader question isn’t simply about where thresholds for overtime pay ought to sit, but how businesses of all sizes can better align their operations with the well-being of their teams. These recent developments touch on a larger narrative about the evolving relationship between labor, compensation, and the economic realities that small businesses face. Change is never easy, but it provides an opportunity for every business to evaluate how it values those who drive its success every day.