WASHINGTON — Associated Builders and Contractors applauded the decision of the U.S. District Court for the Eastern District of Texas, which set aside the U.S. Department of Labor’s controversial 2024 final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees. The rule changed overtime regulations under the Fair Labor Standards Act.
The court found that the Biden-Harris Labor Department’s 2024 overtime rule’s July 1, 2024, increase was unlawful as well as the scheduled Jan. 1, 2025, increase. Specifically, DOL’s final rule increased the minimum annual salary level threshold for exemption to $43,888 on July 1, and on Jan. 1 it was scheduled to increase to $58,656. In addition, salary thresholds would have been updated every three years starting on July 1, 2027.
“This decision is the correct one, and an important win for ABC members and the rest of the regulated community,” said Ben Brubeck, ABC vice president of regulatory, labor and state affairs. “It’s also no surprise. In 2017, this court permanently enjoined the DOL’s 2016 overtime rule on similar grounds, writing that the rule increased the minimum salary level threshold for exemption far beyond a level which the DOL is permitted to adopt. The court also found unlawful the automatic indexing provision in the new rule that would have further increased the salary threshold without the notice-and-comment rulemaking required by the Administrative Procedure Act.
“Some ABC members employ workers who would have lost their exempt status as of Jan. 1 because of the 2024 overtime rule’s scheduled increase,” said Brubeck. “This would have disrupted the construction industry, specifically harming small businesses, restricting employee workplace flexibility in setting schedules and hours, and hurting career advancement opportunities.
“The 2024 rule’s radical increase in the salary threshold for exemption would have also further complicated the current economic outlook,” said Brubeck. “Multiple industries, like construction, are grappling with uncertain economic conditions such as high interest rates, supply chain disruptions, materials price inflation, and workforce shortages, all of which push operational costs ever higher. Specifically, ABC estimates that the construction industry must hire more than half a million additional workers in 2024 to meet demand. The rule’s triennial automatic indexing provision would have exacerbated its harmful impact on businesses and added to rampant inflation that is already harming the economy as a whole.”
On May 22, ABC joined a coalition of business groups in filing a complaint in the U.S. District Court for the Eastern District of Texas challenging the DOL’s overtime rule.
On Nov. 7, 2023, ABC called on the DOL to withdraw the proposed rulemaking. ABC also signed onto coalition comments criticizing the overtime proposed rule, joining 244 national, state, and local organizations representing employers from a wide range of private industries and public, nonprofit, and education sectors.
In 2016, the Obama administration issued a final overtime rule that would have doubled the minimum salary level for exemption from $23,660 to $47,476 per year. ABC, along with several other business groups, sued the DOL in federal court and succeeded in blocking the rule from taking effect.
Meanwhile, the following statement comes from Brian Wild, Chief Government Affairs Officer at the National Association of Wholesaler-Distributors (NAW), celebrating a major victory for the NAW Legal Policy Center.
“This is a major victory for the NAW Legal Policy Center as we fight to defend free enterprise from out of touch federal bureaucrats. Once again, the courts vacated a Department of Labor overtime rule that would harm wholesaler-distributors and businesses nationwide. The significant increase in salary thresholds would have stifled employee growth opportunities, reduced workplace autonomy, and limited flexibility for workers. This is the second time in eight years that employer groups have had to turn to the courts to overturn an Overtime Rule where DoL exceeded its statutory authority and failed to address flaws previously identified by the courts. By stopping this detrimental regulation, wholesaler-distributors can now focus on maintaining America’s supply chain instead of grappling with federal overreach.”
Tagged with ABC, NAW
The DOL’s proposed overtime rule represents a critical update to protect workers’ economic interests and address wage stagnation. While the ABC claims the rule would harm businesses, the reality is quite different:
1) Wage Protection and Economic Fairness
The proposed salary threshold increases are long overdue. The current exempt salary level has remained largely unchanged for decades, leaving millions of workers effectively working overtime without proper compensation. By raising the threshold to $43,888 and then $58,656, the rule would ensure that more workers receive fair compensation for their labor, particularly in industries like construction where employees often work extended hours.
2) Mischaracterization of Economic Impact
The ABC’s argument about economic disruption is misleading. The incremental increases are designed to be gradual and predictable, giving businesses time to adapt. The triennial indexing provision is a responsible mechanism to ensure that wage thresholds keep pace with economic changes, preventing future significant jumps and providing long-term stability for both employers and employees.
3) Worker Flexibility and Career Advancement
Contrary to the ABC’s claim, the rule would actually enhance workplace flexibility. By ensuring more workers are compensated for overtime, businesses are incentivized to more carefully manage work hours, potentially leading to more efficient scheduling and better work-life balance. The argument that this would restrict career advancement is specious – fair compensation is more likely to improve morale and retention.
4) Small Business Considerations
While the ABC suggests the rule would harm small businesses, the graduated increases and reasonable thresholds are precisely designed to minimize economic strain. Small businesses would have time to adjust their compensation structures, potentially leading to more transparent and fair employment practices.
5) Broader Economic Context
The rule addresses a critical issue of wage inequality. As corporate profits have grown and executive compensation has skyrocketed, many workers have seen their real wages stagnate. The overtime rule is a modest attempt to address this imbalance and ensure that workers are fairly compensated for their labor.
The court’s decision to set aside the rule perpetuates a system that fails to protect workers’ economic interests. By blocking these modest increases, the ruling effectively maintains a status quo that benefits employers at the expense of workers’ financial well-being.
The ABC’s argument essentially boils down to protecting business interests at the cost of worker compensation, framing reasonable wage protections as an undue burden. This perspective prioritizes short-term business convenience over long-term economic fairness and worker protection.