Yesterday, a federal judge in Texas imposed an injunction effectively blocking changes to federal overtime laws that were to take effect on December 1.  The decision affects employers in all states, including Massachusetts.  In deciding the case, U.S. District Judge Amos Mazzant of the Eastern District of Texas ruled that the Department of Labor regulations exceeded its authority.  As a result, once again employers who scrambled to meet the new regulatory requirements find themselves in the difficult position of either undoing the changes they have made to comply or leaving those changes in place, as well as the associated costs.

The Fair Labor Standards Act (FLSA) establishes overtime rules and the standards by which employees may be exempted from them.  Exemption requires that employees perform certain duties and be paid at a certain threshold level.  Although the FLSA does not specify that employees must be paid at a certain threshold, regulations issued by the Department of Labor in 1940 and updated numerous times since then have set a minimum salary threshold as one of the requirements for exemption from overtime.  The salary threshold was most recently updated in 2004 to $455.00 per week, or $23,660 per year.

The Department of Labor’s new regulations, issued in May and scheduled to take effect on December 1, would more than double the threshold to $913.00 per week, or $47,476.00.  In his ruling Judge Mazzant stated the increase of this magnitude would “supplant” the duties test, adding that responsibility belonging to Congress, not the DOL.

The eleventh hour ruling means that many employers who have already implemented changes to employee’s pay and timekeeping procedures now have to decide if they want to roll back those change or just forge ahead.  Unfortunately, many employers have already communicated these pay and procedural changes.  For these employees, it will be difficult to take advantage of the injunction and delay any changes until a final ruling is made.

Unknown at this time is whether the DOL will appeal the ruling.  Ultimately, the court process may drag on while the new Congress takes action to undo the regulations.  Employers may want to communicate to employees the current uncertainty and that they will be monitoring developments.  In the meantime, employers who have not implemented or communicated changes should sit and wait.  Those who have implemented or communicated changes should assess the business and employee relations impact of undoing these changes and determine whether they will proceed as planned or return to prior practices.+++