A Texas judge’s ruling that delays implementation of a new federal overtime law throws more confusion into an already muddy topic for Maine businesses.

The U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction that prevents the U.S. Department of Labor from nearly doubling the threshold under which certain salaried workers must be get overtime pay at a time-and-a-half rate.

The law, scheduled to take effect next Thursday, had sent Maine businesses and nonprofits scurrying last summer to see whether they needed to make changes – including awarding pay raises to some staff – in order to comply with the law. At the time, the Department of Labor estimated that 16,000 workers in Maine would be affected by the change.

But now, Judge Amos Mazzant’s ruling allows the legality of the regulation, championed by the Obama administration, to be examined in more detail by the court. The law would raise the threshold under which many salaried workers must be paid time-and-a-half from $23,660 to $47,476. A hearing date has not been set.

Attorney Tawny Alvarez of the Portland law firm Verrill Dana said that based on her discussions with clients, it appears about half of Maine employers already have implemented the higher threshold for overtime pay exemption. Alvarez said the law firm is cautioning those clients not to change course at this point.

“It’s only a temporary injunction,” she said of the federal court’s decision.

MANY CHANGES ALREADY MADE

Those businesses that have not already implemented the change can hold off on doing so for now, Alvarez said, but they should recognize that the new rule still could go into effect on Dec. 1 or shortly thereafter.

“They should be ready to comply quickly if the decision is reversed,” she said, noting that the new overtime pay requirement could be applied retroactively to Dec. 1 if the injunction is lifted at a later date.

David Clough, Maine director of the National Federation of Independent Business, said most of his 3,000 members already have analyzed whether the new law would affect their workforces and made the necessary adjustments. But the hard costs associated with complying with the new overtime rules are already underway.

“There was a huge number of people between the old level and the new level, and for some businesses the hard costs will be quite expensive,” Clough said. “They have already started paying higher labor costs.”

VOTE IN MAINE AFFECTS OVERTIME

The new overtime law, which President Obama signed in May, was considered one of the president’s signature achievements to help the middle class. The OT pay standard for salaried workers hadn’t been changed since 2004.

The U.S. Department of Labor is considering its options, including whether to appeal the judge’s decision, according to a media release from the department.

Maine has its own overtime pay requirement, set by state statute, that says qualifying salaried employees must receive overtime pay for extra hours worked if their annual salary does not exceed 3,000 times the state’s hourly minimum wage. At the current minimum wage of $7.50 an hour, that threshold is $22,500 a year.

However, because of Maine’s minimum wage increase to $12 by 2020, approved by voters Nov. 8, that threshold will increase to $36,000 a year by 2020 even if the federal rule change is struck down. Either way, Maine employers will need to prepare for higher costs when it comes to overtime pay, Alvarez said.

“This isn’t a situation where employers can just put it out of their mind,” she said.

STATE TO PROVIDE GUIDANCE

Julie Rabinowitz, spokeswoman for the Maine Department of Labor, said her department is looking for additional information about the federal court’s hearing schedule and potential actions of the Trump administration or Congress. But in the meantime, the department will provide guidance to employers.

“We’ve provided updated information about the minimum wage changes that can be linked to under Maine statistics from Maine.gov/labor,” she said. “We will be adding appropriate information there about the salary threshold as soon as we have additional info as to the potential dates of any hearing.”

The Texas court agreed with plaintiffs that the U.S. Department of Labor exceeded its delegated authority with the overtime rule, and that it could cause irreparable harm if it was not quickly stopped. The department estimated its rule change could affect 4.2 million workers nationwide. The order came after 21 states sued the agency to block the rule before it took effect. In September, Maine Gov. Paul LePage signed onto the lawsuit as an individual, not as the state’s governor.

The temporary injunction was hailed by multiple business organizations, including the National Retail Federation, the U.S. Chamber of Commerce, and representatives of the manufacturing, construction and insurance industries.

 

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