More than a dozen national business groups filed a lawsuit against the US Department of Labor to block a new rule that increases the salary thresholds required to exempt a salaried executive, administrative or professional employee from federal overtime pay requirements. The lawsuit, filed May 22, claims the rule violates the Administrative Procedure Act and that the department exceeded its authority under the Fair Labor Standards Act.

Effective July 1, the DOL’s rule increases the Fair Labor Standard Act’s salary threshold to the equivalent of an annual salary of $43,888, or $844 a week, from the present annual salary threshold of $35,568 enacted by the Trump administration in 2019; the threshold will increase again on Jan. 1, 2025, to $58,656 annually, or $1,128 per week.

The rule also adjusts the threshold for highly compensated employees to $132,964 per year on July 1 from the current $107,432, and then to $151,164 on Jan. 1, 2025. Salary thresholds will update every three years by applying up-to-date wage data to determine new salary levels starting July 1, 2027.

The lawsuit was filed in the US District Court for the Eastern District of Texas. Plaintiffs in the case include the National Retail Federation, the American Hotel and Lodging Association, the Associated Builders and Contactors, the National Federation of Independent Business and the International Franchise Association.

“DOL’s final rule is an additional complicated and expensive government mandate that small businesses have to navigate at a time when small business optimism is historically low,” Beth Milito, executive director of NFIB’s Small Business Legal Center, said in a press release. “DOL does not have the legal authority to raise the salary threshold or include automatic updates. The small business community asks the court to consider the needs of Main Street and stop DOL from enforcing this onerous regulation.”

The suit argues that the new rule ignores a precedent set in 2017, Bloomberg Law reported. In that case, the same Texas court struck down a similar overtime rule issued by the Obama administration that sought to raise the salary threshold to $47,476. In his ruling, Judge Amos Mazzant found that the DOL rule focused so much on a salary level to determine whether a worker was exempt from overtime that it eliminated the consideration of their job duties.

“Just as in 2017, the Department’s new salary threshold is so high that it is no longer a plausible proxy for delimiting which jobs fall within the statutory terms ‘executive,’ ‘administrative,’ or ‘professional,’” the suit states. “The 2024 Overtime Rule thus contradicts the congressional requirement to exempt such individuals from the minimum wage and overtime requirements of the FLSA.”

The lawsuit also argues that the automatic updates to the salary threshold every three years would violate notice and comment requirements under the APA.

A motion for a preliminary injunction is expected due to the approaching July 1 implementation date, The National Law Review reported. However, the plaintiffs have not yet requested a temporary restraining order or a preliminary injunction blocking the DOL from implementing the new rule. Instead, the lawsuit requests “expedited consideration … to avoid irreparable harm to both employers and employees who will be subject to new overtime requirements of the Department’s unlawful Rule.”

(Plano Chamber of Commerce, et al., v. Su, et al., No. 4:24-cv-00468, E.D. Tex. May 22, 2024).

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