The rules would have adjusted upwards the annual salary threshold at which employers need to start paying overtime to their employees from those who earn under $23,660 per year to all those under $47,476 per year. However, in a surprise eleventh-hour ruling last week, US District Judge Amos Mazzant of the Eastern District of Texas issues a nationwide preliminary injunction blocking the new rules from coming into effect as planned on 1 December. Justice Mazzant concluded that the 21 plaintiff states that brought the lawsuit against the DoL had established a prima facie case that the regulatory agency was overstepping its statutory authority with some of the planned revisions. His strongly-worded opinion on the case has led many to believe that a permanent injunction is likely to follow.

Preparation gone to waste

Small business across the country have been scrambling to get their affairs in order before the news rules came into effect, with many choosing to switch salaried workers to hourly-rate positions in order to avoid footing the bill for overtime pay. However, the injunction has left many companies unsure of how to proceed with organising their employment arrangements. While the about-face will come as a relief to many employers who feared facing heftier labour costs, others are angry that their efforts to prepare for the new rules have now been for nothing.

Employee relations issues

‘This is information I could have used three months ago,’ Hobby Works owner and president Michael Bray told Fortune. ‘Psychologically, it felt like a demotion [for the employees], and people were a little upset.’ Other employers are in the difficult position of potentially having to take back overtime rates or wage increases already offered to employees in exchange for restructured employment contracts. ‘If you’ve already paid someone a higher salary, it’s very hard to take that back from an employer relations standpoint,’ explains Reed Smith employment lawyer Michael Jones in Corporate Counsel. ‘However, in industries with tight margins, like hospitality and retail, you may have to think of taking them back because if you’re competitors aren’t paying them, you’ve put yourself at a competitive disadvantage.’

Sources: Corporate Counsel; Fortune