Retail Leaders Respond to Overtime Pay Ruling by U.S. Court

Two key retail organizations responded approvingly after a federal judge in Texas permanently struck down a Biden administration rule that would have made millions of salaried workers in the U.S. eligible for overtime pay.

The rule, which had been approved in April, would have increased the minimum annual salary threshold that determines overtime pay eligibility under the Fair Labor Standards Act. The decision was made in the U.S. District Court in the Eastern District of Texas, and it means the previous threshold for overtime of $35,500 has been restored. U.S. District Justice Sean Jordan agreed with the state of Texas and a group of business organizations that claimed the Labor Department exceeded its legal authority by finalizing a rule in April that would have substantially broadened overtime pay for salaried workers.

Nearly all hourly workers are entitled to overtime pay – time and a half – after 40 hours a week. However, many salaried workers are not eligible unless they earn below a certain level. The now struck-down rule had required employers to pay overtime to salaried workers who make less than $43,888 a year in select executive, administrative and professional jobs, and that benchmark was going to increase to $58,656 next year.

The National Retail Federation’s executive vice president of government relations David French praised the court for “concurring with the NRF’s arguments that the Labor Department exceeded its legal authority in promulgating rules clearly inconsistent with the Fair Labor Standards Act. The rules, if finalized, would have curtailed retailers’ ability to offer the most flexible, generous and tailored benefits packages to lower-level exempt employees across the industry.”

French said that the NRF opposed “these rules” from the outset, which would have forced employers to reexamine compensation packages for millions of workers nationwide. “Had the rule taken effect, some workers would have lost the status of a managerial position, valuable educational and training experiences, the capability to travel on the employer’s behalf, and/or flexibility as to when, how and where they work,” French said.

A year ago the NRF submitted comments to the DOL opposing its proposed rule on overtime regulation. The organization also commissioned Oxford Economics to analyze the economic effects the overtime rule would have had if implemented. The study determined that the proposed rule could have impacted more than 7.2 million workers, according to the NRF.

The Retail Industry Leaders Association’s vice president of workforce policy Evan Armstrong said in a statement that retailers “are relieved” by the court’s decision to block the DOL’s final overtime rule, “which was an overzealous and unreasonable approach from the start that ignored the realities of today’s economy and the law.”

He added, “RILA has long argued the DOL’s approach to overtime policy would create uncertainty for employers. The court recognized rightly that the rule was legally dubious and ultimately created an unworkable standard.”

RILA represents more than 200 retailers, product manufacturers, and service suppliers, which account for more than $2.7 trillion in annual sales, millions of American jobs, and hundreds of thousands of stores, manufacturing facilities, and distribution centers domestically and abroad. Armstrong said, “Retailers will remain advocates for workforce policy that fosters commonsense flexibility and job growth that we know today’s workforce desires. We look forward to collaborating with the department in the future to craft a more practical proposal.”