Biden overtime pay rule challenged by US business groups

FILE PHOTO: U.S. President Joe Biden looks on as he deliver remarks at the Westwood Park YMCA in Nashua, New Hampshire, U.S. May 21, 2024. REUTERS/Leah Millis/File Photo

By Daniel Wiessner

(Reuters) - A coalition of U.S. business groups has filed a lawsuit seeking to block a Biden administration rule that would extend mandatory overtime pay to 4 million workers, saying it goes too far.

The groups filed a complaint in Sherman, Texas federal court late on Wednesday claiming the U.S. Department of Labor lacked the power to adopt the rule and that it would force businesses to cut jobs and limit workers' hours.

The Sherman court has two judges, one of whom in 2017 struck down a similar rule adopted by the Obama administration.

The rule would require employers to pay overtime premiums to workers who earn a salary of less than $1,128 per week, or about $58,600 per year, when they work more than 40 hours in a week.

The current threshold of about $35,500 per year was set by the Trump administration in a 2020 rule that advocacy groups and many Democrats have said does not cover enough workers.

The business groups in the lawsuit said the costs of complying with the new rule "will force many smaller employers and non-profits operating on fixed budgets to cut critical programming, staffing, and services to the public."

The Labor Department did not immediately respond to a request for comment. The groups involved in the lawsuit include the National Federation of Independent Business, the International Franchise Association and the National Retail Federation.

The case may be assigned to U.S. District Judge Amos Mazzant, an appointee of Democratic former President Barack Obama, who in 2017 blocked a rule that would have raised the overtime salary threshold to about $47,000.

The judge said the cutoff was so high that it would sweep in some management employees who are not entitled to overtime pay under federal wage law.

"The Department’s 2024 Overtime Rule largely repeats the errors of the 2016 Rule and fails to address the flaws previously identified by this Court," the business groups said in their lawsuit.

The groups in a court filing accompanying the complaint said it was related to the Obama-era case and requested that it be assigned to Mazzant.

The other Sherman-based judge, U.S. District Judge Sean Jordan, is an appointee of Republican former President Donald Trump.

Under the new rule, the salary threshold will increase to $43,888 on July 1 and to $58,656 on Jan. 1, 2025. And starting in 2027, the threshold will automatically increase every three years to reflect changes in average earnings.

(Reporting by Daniel Wiessner in Albany, New York; Editing by Kirsten Donovan)