WAGES; HOURS OF WORK; EMPLOYMENT (GENERAL);

WAGES; HOURS OF WORK;

You asked for a summary of the proposed changes to the federal regulations governing overtime pay eligibility. You also wanted the pros and cons of the issue.

SUMMARY

On March 31, 2003, the Bush Administration proposed changing federal regulations governing which employees must be paid overtime for any hours worked over 40 a week. The federal Department of Labor (DOL) is proposing the new rules to modernize and streamline the current regulations, which were established under the federal Fair Labor Standards Act of 1938 and have not been changed since 1975.

By DOL’s estimation the new rules would make about 1. 3 million low-wage workers eligible for extra pay if they work more than 40 hours a week. The changes would also exempt from overtime about 640,000 administrative, executive, and professional employees (generally more highly paid), who now receive it. Pro-labor groups contend this latter estimate is too low, saying as many as eight million employees may lose overtime pay rights.

Labor organizations, such as the AFL-CIO, have embraced making the low-wage group automatically eligible for overtime and have bitterly fought the move to exempt more administrative, executive, and professional employees from receiving overtime.

As regulatory changes, the new rules do not need Congressional approval, although some members of Congress are seeking to pass legislation preventing DOL from changing the regulations. An attempt to pass such legislation narrowly failed in the House in July. The Senate is expected to take up the matter soon and at least one senator has promised to propose a similar amendment to an appropriations bill.

THE PROPOSED CHANGES

The proposal, which was subject to a 90-day public comment period that ended on June 30, changes the regulation that defines blue-collar and white-collar workers and determines who must be paid time-and-a-half for working more than 40 hours a week. The changes would:

1. make about 1. 3 million low-wage workers, including managers, automatically eligible for overtime if they earn less than $ 22,100 a year (the current threshold for automatic qualification is earning less than $ 8,060 annually);

2. exempt workers earning more than $ 65,000 a year if they perform office or non-manual work; and

3. broaden who may fall under the executive, administrative, and professional overtime exemptions if they earn more than $ 22,100 a year.

The changes to the executive, administrative, and professional exemption are the most complicated. Under the current rules, employees qualify for this exemption if they devote at least 80% of their work time to using discretion or making independent judgments that cannot be standardized in a given time period.

Under the proposal, employees are exempt managers if they direct at least two employees, manage a business, and have hiring and firing responsibilities. Similarly, administrative employees are exempt if they hold a position of responsibility and effect the operation or finances of the company. The proposed rules also change the definition of exempt “learned professionals. ” Instead of requiring an advanced degree, the new rule would count workers with skills acquired in (1) technical or community colleges and (2) the military.

The proposal will not effect overtime called for in collective bargaining agreements. The new rules are due to take effect in early 2004.

PROS AND CONS

The proposed rule changes have generated a lot of controversy. Business groups generally support the changes, and labor groups favor the change for low-wage workers, but vehemently oppose the rest. Below are the pros and cons of the debate.

Pros

1. Existing rules are antiquated (last updated in 1975) and geared toward a manufacturing-based economy rather than an information and technology-based one.

2. Existing rules are complicated, confusing, and lead to more class-action lawsuits than any other area of labor law, according to DOL.

3. The new simplified rules will give both employers and employees a better understanding of who is eligible for overtime pay.

4. The new rules do not prevent an employer from paying overtime in order to keep good employees.

Cons

1. Millions of workers, by one estimate as many as 8 million, who depend on overtime to make ends meet will no longer be eligible.

2. Employees in occupations as diverse as paralegals, emergency medical technicians, licensed practical nurses, draftsmen, technical writers, bookkeepers, lab technicians, cooks, and factory floor supervisors may no longer be eligible for overtime.

3. The new rules create an incentive for employers to designate employees as managers or administrators in order to avoid paying overtime.

4. It also creates an incentive for employers to pressure employees into working overtime, without pay, rather than hiring new workers, thus slowing job creation.

JM: ro