A federal judge in Texas has blocked a new rule proposed by the Biden administration that would have expanded overtime pay eligibility for millions of salaried workers in the United States. The rule, set to take effect on January 1, 2025, aimed to raise the salary threshold under which salaried workers qualify for mandatory overtime pay from $35,568 to $58,656 per year. Small business owners have largely reacted positively to the decision, citing the need to maintain manageable labor costs and stable product prices.
Guillaume Drew, founder of the New York-based online sustainable home goods retailer Or & Zon, noted that while none of his current 12 staff members would have been affected by the rule, he believes fair compensation is essential. “Companies need to find an equilibrium between being financially viable and caring about employees,” Drew commented. Sheldon Sutherland, owner of San Diego-based Epoxy Werx, echoed similar sentiments, stating, “As a small business, managing labor costs is critical, and the proposed change would have significantly increased expenses.
This decision helps us keep our pay structure stable while continuing to offer competitive wages.”
Various small business organizations have also supported the ruling.
Federal judge blocks Biden’s overtime rule
John Arensmeyer, Founder & CEO of Small Business Majority, suggested that more measured and predictable threshold increases would be beneficial, while Karen Kerrigan, president & CEO of the Small Business & Entrepreneurship Council, said the ruling assists struggling small business owners in aligning their compensation approaches with market needs.
However, not all small business owners agree with the decision. Stephanie Penn, owner of the online t-shirt boutique Tee & Honey in Southfield, Michigan, believes fair pay, including overtime, boosts morale and productivity. “By striking down the rule, the court places a heavier burden on businesses like mine, striving to do right by employees, while potentially increasing inequities that could harm both morale and retention,” Penn said.
The ruling has prompted employers to reconsider their plans for reclassifying employees or adjusting salaries. Legal experts advise against reversing recent changes too quickly, as this could lead to employee dissatisfaction and potential legal challenges. Employers are encouraged to stay informed and keep a close watch on any developments, as changes in federal administrations often bring shifts in labor regulations.
