Federal Court Blocks Biden's Overtime Expansion: What Employers and Workers Need to Know

In a decision affecting millions of American workers, a federal court in Texas has struck down the Biden administration's attempt to expand overtime pay protection. The ruling, issued by U.S. District Judge Sean Jordan, effectively maintains the current salary threshold at which workers become eligible for overtime pay at $35,568 annually, rather than allowing it to increase to nearly $59,000 as the administration had planned.

Understanding Overtime Pay: The Basics

Before delving into the court's decision, it's important to understand how overtime pay works in America. The Fair Labor Standards Act (FLSA) requires employers to pay most workers time-and-a-half for any hours worked beyond 40 in a week. However, the law includes important exceptions for certain white-collar workers, known as "exemptions."

These exemptions were originally designed to exclude high-level executives, administrators, and professionals from overtime requirements. To be considered exempt from overtime pay, an employee must pass three tests. First, they must be paid a salary rather than an hourly wage. Second, their salary must meet a minimum threshold (currently $35,568 per year). Third, their actual job duties must primarily involve executive, administrative, or professional work.

For example, a retail store manager who earns $40,000 annually and spends most of their time supervising employees and managing operations might be exempt from overtime. However, if that same manager spends most of their time stocking shelves or running a cash register, they might not qualify for the exemption despite their title.

The Biden Administration's Attempted Changes

The Department of Labor under President Biden sought to dramatically expand overtime protection by raising the salary threshold in two stages. The first increase, which took effect in July 2024, raised the minimum to $43,888. The second stage would have pushed it to $58,656 in January 2025. The rule also included a provision for automatic increases every three years to keep pace with wage growth.

The administration estimated these changes would have extended overtime protection to roughly 4 million additional salaried workers. For these workers, the change would have meant either additional pay for extra hours worked or a limit on their work weeks to 40 hours.

The Legal Challenge

The lawsuit that stopped the overtime rule was filed by the State of Texas along with a coalition of business groups, including the National Retail Federation. This wasn't a random choice of venue or plaintiffs. Texas and business organizations strategically chose to file in the Eastern District of Texas, a court that had previously struck down a similar Obama-era overtime rule in 2016.

The choice of this particular court reflects a well-established legal strategy. The Eastern District of Texas has historically been receptive to challenges against federal regulations, particularly those involving labor and employment issues. Additionally, cases filed in this district can reach the Fifth Circuit Court of Appeals, which has often been skeptical of expansive federal regulatory authority.

The plaintiffs argued that the new rule would create substantial burdens for businesses, potentially forcing them to cut jobs and reduce work schedules. The National Retail Federation, representing one of America's largest employment sectors, claimed the rule would severely limit retailers' ability to offer flexible benefit packages to lower-level exempt employees. They also argued that the increased payroll costs would harm businesses still recovering from the economic impacts of the pandemic.

Texas's involvement as a lead plaintiff was particularly significant. As a state employer, Texas argued it would face millions in additional payroll costs, giving it standing to challenge the rule. This state-level involvement helped transform what might have been seen as primarily a business issue into a question of federal government overreach, a framing that resonated with the court's previous decisions on federal regulatory authority.

The timing of the lawsuit was also strategic. The plaintiffs initially secured a preliminary injunction that blocked the rule from taking effect in Texas just before its July 1 implementation date. This early victory set the stage for the broader challenge that resulted in Judge Jordan's nationwide ruling.

The Court's Decision

Judge Jordan's ruling centered on a fundamental question: Did the Labor Department overstep its authority? The court concluded that it did. The judge found that by setting such a high salary threshold, the Department had effectively created a "salary-only" test for overtime exemption, pushing aside the equally important consideration of an employee's actual job duties.

This isn't the first time such an expansion has been blocked. In 2016, the Obama administration attempted a similar increase, which was stopped by the same court. The current threshold of $35,568 was set during the Trump administration in 2019, marking the first increase since 2004.

What This Means for Workers and Employers

For workers, the immediate impact is clear. Millions who would have gained overtime protection will remain exempt if they meet both the current salary threshold and the duties test. This particularly affects middle-management employees in retail, restaurants, and other service industries who often work well beyond 40 hours per week without additional compensation.

Employers who had already begun implementing changes to comply with the July 2024 threshold face a decision. While they can legally revert to the lower threshold, employment law experts advise careful consideration before reducing any employee's salary or changing their overtime eligibility. Some employers may choose to maintain the higher salaries to retain employees and maintain morale.

It's crucial to note that several states, including California, New York, and Washington, have their own, higher salary thresholds for overtime exemption. Employers in these states must continue to comply with these more stringent requirements regardless of the federal court's decision.

Looking Forward

The Department of Labor has not yet announced whether it will appeal the decision. However, this ruling highlights the ongoing tension between efforts to modernize labor standards and concerns about business costs and flexibility. Worker advocacy groups argue that the current threshold is far too low, leaving many modestly paid employees working long hours without extra compensation. Business groups counter that higher thresholds would force them to reduce jobs and limit flexible work arrangements.

For now, employers must continue to navigate the complex requirements of overtime law, ensuring they properly classify employees based on both their salaries and their actual job duties. Workers, meanwhile, should understand their rights under both federal and state law, particularly if they live in states with more protective overtime requirements.

The overtime debate underscores a broader question facing American workplaces: How do we balance fair compensation for workers with the operational needs of businesses? While this court decision provides a clear answer for now, the discussion is far from over.

Walmart's $44M Settlement: A Win for Employee Rights in COVID-19 Workplace Measures

In a significant victory for workers' rights, Walmart has agreed to a $44 million settlement in a class-action lawsuit concerning uncompensated time for mandatory COVID-19 screenings. This case highlights crucial issues in wage and hour law, particularly in the context of pandemic-related workplace safety measures.

The Lawsuit and Its Implications

The lawsuit, filed in November 2020, alleged that Walmart violated California labor laws by failing to compensate employees for time spent on mandatory pre-shift COVID-19 screenings. These screenings, which included temperature checks and health questionnaires, added several minutes of unpaid time to employees' workdays.

This case underscores a critical principle in employment law: time spent on mandatory work-related activities should be compensable. The settlement serves as a reminder that employers must carefully consider whether health and safety measures constitute work time under applicable laws.

Settlement Details and Employee Impact

The $44 million settlement will benefit over 250,000 current and former Walmart employees in California. While Walmart has not admitted wrongdoing, this resolution avoids protracted litigation and sets a notable precedent for similar cases.

For affected employees, this settlement not only provides financial compensation but also validates their right to be paid for all work-related activities, including those implemented for workplace safety during extraordinary circumstances like a pandemic.

Legal Implications and Future Considerations

This case exemplifies the importance of collective action in addressing workplace issues. It demonstrates how class-action lawsuits can effectively challenge large corporations and enforce labor laws on a broad scale.

The settlement raises important questions for both employees and employers:

1. What constitutes compensable work time, especially in the context of health and safety measures?

2. How should employers implement necessary safety protocols while ensuring compliance with wage and hour laws?

3. What rights do employees have regarding compensation for time spent on mandatory workplace activities outside of regular duties?

Moving Forward: Advice for Employees and Their Representatives

1. Stay Informed: Employees should familiarize themselves with their rights under federal and state labor laws, particularly regarding compensable time.

2. Document Time: Keep detailed records of all time spent on work-related activities, including health screenings or other mandatory procedures.

3. Communicate Concerns: If you believe you're not being compensated fairly, raise the issue with your employer or HR department.

4. Seek Legal Advice: If concerns persist, consult with an employment law attorney to understand your options.

5. Consider Collective Action: This case demonstrates the power of collective legal action in addressing systemic workplace issues.

For employment lawyers, this case emphasizes the need to stay vigilant about emerging workplace practices, especially those arising from extraordinary circumstances like the COVID-19 pandemic. It also highlights the potential for class-action lawsuits to effect significant change in employment practices.

This settlement serves as a reminder that even as workplace norms evolve, the fundamental principles of fair compensation and adherence to labor laws remain paramount. It underscores the ongoing need for robust legal representation to protect and advance employee rights in an ever-changing work environment.

How Do I Find An Employment Attorney?

Texas employment law attorney Chris McKinney discusses finding and hiring an employment lawyer.

So you need to hire an employment lawyer but you don’t know how to get started? Then this video is for you. Hiring an employment attorney to guide you through an employment-related dispute can be challenging.

For this reason it is important that you do some research and get your own materials together before you start making calls. Employment lawyer Chris McKinney Explains.

Report: Wage Theft Still Rampant In Texas’ Rio Grande Valley

San Antonio Express News has an investigative report out today covering the rampant wage theft that still takes place against produce workers in the Rio Grand Valley: Fair pay a distant dream for produce packers in Rio Grande Valley

For two years, Jorge Perez Hernandez worked 12 to 18 hours a day, six days a week, in a small refrigerated warehouse here. He sorted fruit and vegetables from Mexico and repackaged them for distribution in the U.S.

***

“I came in at 8 a.m. and I left at 11 p.m. or 12 at night, with an (unpaid) hour for lunch and dinner,” he said. “Six days a week.”

And when they complain or report being underpaid…

“Sometimes he’d carry the gun, put it on the table so we could see it there, to intimidate us,” Perez Hernandez recalled.

De La Fuente heard about their complaint and fired all six workers, Galvan said.

***

Employers have coached workers to lie to investigators about their pay and working conditions, and in some cases have fired them for cooperating, court records show. In one case, a packing company reported an undocumented worker to U.S. immigration authorities to retaliate against the man for talking to investigators, according to court records.

And, the workers get the message…

After Fuentes Farms fired them, five of the six workers who had complained to the commission dropped their cases. They feared being blacklisted in the industry — or worse, deported.

The government can’t keep up, even with help from excellent public interest firms like Texas RioGrande Legal Aid.

Experts largely agree that the Department of Labor doesn’t have the resources to stay on top of the situation. Many workers say speaking up often means becoming unemployable.

In this border region of Texas, many undocumented workers struggle to feed their families, being abused by American companies while staying under the radar to avoid deportation. What keeps them going is their dream for future generations.

“They want their children to be educated,” he said.

His oldest child is 15, a sophomore in high school. Like his parents, he is undocumented. Unlike them, he speaks both English and Spanish. When he grows up, he wants to be a lawyer.

New Labor Rule Means Gig Economy Workers In Texas Can't Get Unemployment Benefits

Last month, the state’s labor regulator approved a controversial new rule on gig economy workers – a rule opponents say will have negative implications for these workers going forward.

Approved on a 2-1 vote, the rule from the Texas Workforce Commission exempts app-based companies that hire contractors – like TaskRabbit or DoorDash – from paying state unemployment insurance taxes for those workers. The three-member commission gave initial approval for the rule in December.

Labor unions and workers advocates say the new rules were tailor-made by lobbyists from a firm called Handy. The agency has defended its rule-making process, saying it is well within its legislatively appointed rights to rule on employment matters and that, per state law, it allowed 30 days of public comment before initially adopting the rules. Opponents have said the rules could incentivize companies to abandon brick-and-mortar businesses to avoid paying those state unemployment taxes.

The risk is that the rule would likely reclassify many construction workers as independent contractors, leaving them without those protections for wage theft and discrimination on job-sites.

Read more: KUT Article

Docking Pay From Salaried, Exempt Employees Is Illegal...And Very Common

The Fair Labor Standards Act (FLSA) is the federal law the controls the terms under which employees must be paid overtime. All employees fall into one of two categories "Exempt" or "Non-Exempt". If an employee is non-exempt, when they reach more than 40 hours in a given work week, they have to be paid at time and a half for any additional hours. If they are non-exempt), they aren't eligible for overtime. Most people think of non-exempt employees as "hourly" and exempt employees as "salaried".

• Pro-Tip: Just because your employer pays you as salaried does not necessarily mean that you should be considered exempt and not entitled to overtime. Exempt employees are typically involved in management or high-level administration of the business. There are other exceptions as well but a good rule of thumb is this: if you are more like a rank and file line worker or clerical worker, you should probably be getting overtime. If you aren't you need to find a good employment lawyer.

As a general rule exempt employees are paid a salary and don't have to be paid overtime no matter how many hours they work. But there are other rules that come that exempt status. One important one that employers often ignore is the rule against docking pay.

Exempt employees who are late or who need to leave work early - for doctor's appointment, child care, whatever - cannot have their pay docked for missing a couple of hours of work. If an exempt, salaried employee shows up for work, even if it's just for 15 minutes, he or she must be paid for the entire day. That's the rule.

The employer can discipline, fire, or demote the employee. But it cannot dock the employee's pay.  Importantly, the employer is allowed to dock vacation time and force the employee to use that to cover the hours missed. But the employees pay may never be docked.

So what happens if the employer breaks this rule and docks pay? Well then the employer has just lost the FLSA "exemption" as to that employee. This means the employee is owed overtime for all hours over 4o worked in the last two years plus all overtime worked in the future. This can add up to a substantial amount.

So, long story short is this: If you are paid by salary and your employer docks your pay for being late or missing a few hours of work here or there, you should contact an employment lawyer right away. Your employer is taking advantage of you and breaking the law. You may be owed a substantial amount of overtime pay.

The Rise of Digital Wage Theft

The days of punching a manual time-clock when you arrive at work are all but over. Digital time tracking systems now use things like facial recognition to monitor when a worker arrives and has finished for the day. However, the software that’s replaced the 19th century time-clock technology is helping some employers steal workers’ hourly pay.

This so-called wage theft is a problem for many healthcare workers, drivers, and food-service and factory employees, according to a study by Elizabeth Tippett, associate professor at the University of Oregon School of Law, published in the American Business Law Journal. An earlier report from the Economic Policy Institute found that wage theft in the US may account for more than $15 billion each year.

How digital wage theft works

Tippett’s study of 330 cases litigated in state and federal courts found three main types of digital wage theft:

• Rounding, which happens when the software is set to alter an employee’s starting and finishing times to pre-defined increments

• Automatic break deductions, which deduct preset time increments (for lunch or other breaks) from pay, regardless of whether the break was taken

• Time shaving, which takes place when managers alter time records to pare down the number of hours worked

Read more about this study in this article by John Detrixhe. 

Supreme Court Denies Overtime Pay to Service Advisors at Auto Shops & Dealerships

This week in Encino Motorcars, LLC v. Navarro, the Supreme Court limited overtime pay for service advisors at car dealerships nationwide, ruling that those employees are primarily salespeople who sell brake jobs, oil changes and other service work. Encino Motorcars' current and former service advisors sought backpay under the Fair Labor Standards Act (FLSA) overtime-pay requirement, 29 U.S.C. 213(b)(10)(A). The requirement exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.”

The Supreme Court, in an 5-4 opinion authored by Justice Thomas, reinstated the dismissal of the suit. According to the Court, service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles." The ordinary meaning of “salesman” is someone who sells goods or services, and service advisors “sell [customers] services for their vehicles,” Service advisors are also “primarily engaged in . . . servicing automobiles.” “Servicing” can mean either “the action of maintaining or repairing” or “[t]he action of providing a service.” Service advisors satisfy both definitions. They meet customers; listen to their concerns; suggest repair and maintenance services; sell new accessories or replacement parts; record service orders; follow up with customers as services are performed; and explain the work when customers return for their vehicles. While service advisors do not spend most of their time physically repairing automobiles, neither do partsmen, who are “primarily engaged in . . . servicing automobiles.”

The Court rejected giving Chevron deference to the federal agency and rejected the interpretation of the Department of Labor and the Ninth Circuit Court of Appeals, who had both relied on matching “salesman” with “selling” and “partsman [and] mechanic” with “[servicing]”. The but the word “or” is “almost always disjunctive.” Using “or” to join “selling” and “servicing” suggests that the exemption covers a salesman primarily engaged in either activity. The Court held that the FLSA gives no textual indication that its exemptions should be construed narrowly, thus ignoring the long-standing precedent that remedial statutes should be interpreted in order to provide broad protections to the individuals they seek to protect. 

Writing in dissent, Justice Ruth Bader Ginsburg said the service advisors at Encino Motorcars "work regular hours, 7 a.m. to 6 p.m., at least five days per week, on the dealership premises. Their weekly minimum is 55 hours." Federal law calls for a time-and-a-half pay after 40 hours in a week, she noted. "Because service advisers neither sell nor repair automobiles, they should remain outside the exemption and within the act's coverage," she said. Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan agreed.

This is but one of many examples to come that will demonstrate the importance of elections on the Court. The election of Trump coupled with the Senate's highly questionable antics used to nab a seat for Justice Gorsuch has led to the elimination of overtime protections for thousands of workers across the country. Many will never see Justice Gorsuch as a legitimate member of the Court. However, his votes (expected to be 100% anti-worker) on the Court will be powerful all the same.

Read the Opinion

"Service Fees" Can Confuse Matters for Tipped Employees

Tipped Employees

While most restaurants leave it up to their customers to decide how much to tip their servers, and increasing trend among some restaurants is to include a mandatory gratuity or “service fee” on their bills. Sometimes this is done only for groups of six or more patrons. Other times it is included as an extra charge when customers purchase a banquet package or other private dining option.

Mandatory gratuities or services fees are legal only under certain circumstances and only if handled properly by the employer. In some states, such fees are only legal if the money is used for the sole purpose of paying the server. Under the FLSA, service charges must be counted as income on the books of the restaurant, and then they may be used to pay servers or for other purposes. In no event, however, may servers be paid less than the minimum wage.

Other common issues tipped restaurant workers face include:

• Requiring servers and bartenders to contribute a percentage of tips to a tip pool, but using the tips to pay employees who are not customarily tipped, such as custodial, management, or kitchen workers.

• Denying overtime pay to employees who worked at more than one restaurant owned or controlled by the same company, even when their combined hours totaled more than 40 hours in one workweek.

• Having employees work off-the-clock, earning only tips for their labor. Even if tipped employees receive most of their pay through tipping, the employer still must pay them at least $2.13/hour in cash wages on top of whatever tips they may earn.

If you have a question about how a tipped employee should be paid or if you think your employer is violating the FLSA, visit my main website to learn more.

Halliburton pays nearly $18.3 million in overtime owed to more than 1,000 employees nationwide after US Labor Department investigation

Employee Rights Under the FLSA

In one of the largest recoveries of overtime wages in recent years for the U.S. Department of Labor, oil and gas service provider, Halliburton, has agreed to pay $18,293,557 to 1,016 employees nationwide. The department's Wage and Hour Division investigated Halliburton as part of an ongoing, multi-year compliance initiative in the oil and gas industry in the Southwest and Northeast.

Investigators found Halliburton incorrectly categorized employees in 28 job positions as exempt from overtime. The company did not pay overtime to these salaried employees — working as field service representatives, pipe recovery specialists, drilling tech advisors, perforating specialists and reliability tech specialists — when they worked more than 40 hours in a workweek, in violation of the Fair Labor Standards Act. The company also failed to keep accurate records of hours worked by these employees.

Simply paying an employee a salary does not necessarily mean the employee is not eligible for overtime. The FLSA provides an exemption from both minimum wage and overtime pay requirements for individuals employed in bona fide executive, administrative, professional and outside sales positions, as well as certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the department's regulations.

The FLSA requires that covered, non-exempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers must maintain accurate time and payroll records.