Under President Obama, the United States Department of Labor issued a rule that would have extended overtime eligibility to over 4.2 million workers. The rule held that workers who make under $47,476 per year would no longer be considered exempt from receiving overtime pay, regardless of their job duties.

Laxalt filed a lawsuit against the Department of Labor, which 20 other states joined, seeking to block the rule from going into effect. Focusing on state employees, Laxalt argued that the rule was unconstitutional because it "tramples on state and local government budgets, forcing states to shift money from other important programs to balance their budgets, including programs intended to protect the very families that purportedly benefit from such federal overreach."

By contrast, the Department of Labor argued that the rule "will result in a meaningful boost to many workers’ wallets, and will go a long way toward realizing President Obama’s commitment to ensuring every worker is compensated fairly for their hard work."

On November 22, 2016, the U.S. District Court in the Eastern District of Texas issued a preliminary injunction, preventing the rule from going into effect. In response to the Court's decision, Laxalt said, "Businesses and state and local governments across the country can breathe a sigh of relief now that this rule has been halted... Today's preliminary injunction reinforces the importance of the rule of law and constitutional government." The Department of Labor issued its own statement, expressing disappointment with the ruling: "We strongly disagree with the decision by the court, which has the effect of delaying a fair day's pay for a long day's work for millions of hardworking Americans."