Overtime Expansion Challenges Multiply in Texas Federal Courts

The US Labor Department’s new overtime rule is facing three legal challenges in Texas district courts, as businesses, the state of Texas, and industry lobbying groups try to vacate the rule ahead of its implementation next month.

Two separate lawsuits filed Monday by software company Flint Avenue and the state of Texas contend that the rule is arbitrary and capricious, and that the DOL lacked the authority to issue the change.

They follow another complaint filed last month in the US District Court for the Eastern District of Texas by more than a dozen businesses and industry groups seeking to cancel the rule, similarly arguing that the DOL went beyond its authority under the Fair Labor Standards Act and violated the Administrative Procedure Act when issuing the policy.

Together, the lawsuits are attempting to head off the new DOL rule before it starts to go into effect July 1, threatening to sideline one of President Joe Biden‘s major wins for workers. The DOL forecasts that the regulation, released April 23, would make 4 million workers newly eligible for overtime.

Notably, Texas’ lawsuit filed in the Eastern District of Texas also makes the argument that the rule impedes on powers reserved to states only.

“Enforcing the FLSA and the 2024 Rule’s minimum salary level against the States infringes upon state sovereignty and federalism by dictating the wages that States must pay to those whom they employ in order to carry out their governmental functions, what hours those persons will work, and what compensation will be provided where these employees may be called upon to work overtime,” it said.

And in Flint Avenue’s case at the US District Court for the Northern District of Texas, the company represented by the New Civil Liberties Alliance also alleges that the rule was improperly issued by Acting Labor Secretary Julie Su because she hasn’t been confirmed by the Senate.

“Acting Secretary Su is asking to be sued over DOL’s egregious behavior,” Mark Chenoweth, president of NCLA, said in a statement Tuesday on the suit. “Unlawfully overstaying her appointment, and now contriving this new FLSA rule that hamstrings small businesses, are a sure recipe for losing in federal court.”

Under the FLSA, certain “white-collar” workers can be exempt from overtime pay requirements if they are salaried, make more than a certain amount each year, and work in a “bona fide executive, administrative, or professional capacity.”

The new rule, set to take effect in two phases, would ensure workers making less than $58,656 a year would be automatically eligible for overtime pay anytime they worked more than 40 hours a week. It would also update that salary threshold every three years.

The cases are State of Texas v. DOL, E.D. Tex., No. 4-00499, complaint filed 6/3/24 and Flint Avenue LLC v. DOL, N.D. Tex., No. 5-00130, complaint filed 6/3/24.