Late last week, the federal district court hearing the case of State of Texas v. U.S. Department of Labor, et al. issued an order invalidating the Department of Labor’s (DOL) final rule on overtime, stating that the agency exceeded its authority in issuing the rule. Trade organizations including the American Society of Travel Advisors (ASTA) and American Hotel & Lodging Association (AHLA) welcomed the news, with ASTA calling it “a significant legal victory for its members and the broader travel community.”
What you need to know: In April, the DOL released a final rule that increased the salary threshold below which employees must be paid overtime when they work more than 40 hours in a week. The rule increased that threshold to $43,888 on July 1, 2024, and was set to increase that threshold again to $58,656 on January 1, 2025. It also called for automatic increases every three years. As a result of the court’s ruling, however, the overtime salary threshold for most workers is now $35,568 (with the threshold for highly compensated workers is now $107,432).
ASTA strongly opposed the rule during the draft phase, submitting comments to underscore its potentially detrimental impact on travel agencies, particularly small businesses. In its submission, SVP and General Counsel Peter Lobasso expressed doubt that the DOL had “the statutory authority to affect… updates to the salary level outside of the notice-and-comment rulemaking process prescribed under the Administrative Procedure Act.”
Said AHLA President and CEO Rosanna Maietta: “AHLA applauds the court for recognizing the potentially devastating impact the Department of Labor’s overtime rule would have had on hoteliers, employees and guests. AHLA and a broad-based coalition of business groups opposed this one-size-fits-all approach, which would have imposed an immediate cost increase at a time when small businesses are already struggling from increased costs.”
The AHLA says it did not oppose the first increase that took effect in July, which was an appropriate adjustment to account for inflation. However, AHLA did oppose the increase set to take place in January and the automatic updates, “which would have dramatically increased costs and made it much more difficult for small business hoteliers to operate their properties.” It added, “The increase would have forced these small businesses to eliminate management positions that have traditionally been stepping-stones for people who find lifelong careers in the hotel industry.”
The Biden administration, ASTA noted, may elect to appeal the decision to the Fifth Circuit; however, it is highly unlikely that the incoming Trump administration would be inclined to continue to defend the rule. This is exactly what happened to an Obama-era DOL rulemaking from 2016 that was similarly invalidated.
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