Changes In Overtime Pay Proposed

Overtime, Work Time, Workers, Clock CBS/AP

New government definitions of white- and blue-collar workers proposed Thursday would drastically change the types of jobs entitled to overtime pay, making eligible millions of low-income employees but cutting thousands of professionals.

Nearly 22 million workers could be affected by the Labor Department's plan, which would be first overhaul of the nation's overtime rules in more than 50 years.

About 1.3 million lower-wage workers now exempt from overtime pay for working more than 40 hours a week would be required to receive it or a salary hike. But at least 644,000 well-paid, professional employees, such as some engineers, pharmacists and insurance claims adjusters, would lose theirs in the proposal, which was submitted Thursday for a 90-day public comment period.

Millions of other workers would gain and lose under the new regulations, though their status isn't clear. Industries most affected by the changes would be construction, retail, health care, business services and personal services.

Overtime pay is just one area of the nation's labor laws that the Bush administration is tackling at the urging of business groups. The Family Medical Leave Act, job training programs and unemployment insurance also could be overhauled.

Employers have been pushing for changes in overtime pay regulations because of mounting lawsuits. Workers filed 79 federal collective-action lawsuits seeking overtime pay in 2001, surpassing for the first time class-action job discrimination suits against employers, according to the American Bar Association.

Businesses and labor unions agree that the current regulations of the 1938 Fair Labor Standards Act and last updated in 1948, are confusing and antiquated. But they disagree about how to update standards that determine what jobs must receive an hourly wage of time-and-a-half for working more than 40 hours a week.

Almost 110 million workers are covered by the law, or about 80 percent of the work force.

Union officials say the Bush administration proposal will allow employers to easily reclassify workers as managers by giving them light responsibilities to avoid paying overtime.

"They're making the test much less onerous for the employer," said Nick Clark, a lawyer for the United Food and Commercial Workers.

Department officials say their proposal renews the focus on low-wage earners, which the law was intended to protect.

Business groups long have complained that the convoluted rules require overtime pay for already well-compensated and highly skilled professionals while ignoring those at the bottom.

Current law exempts workers from overtime pay if they earn more than $155 a week, or $8,060 a year. Those salary tests haven't been updated in 28 years.

Workers also must meet a series of other confusing job criteria, such as devoting at least 80 percent of their time to "exercising discretion" and other "intellectual" tasks that cannot be "standardized in ... a given period of time." Many job descriptions no longer exist, such as key punch operators, straw bosses, leg men and gang leaders.

The revisions are "moderate and measured," said Tammy McCutchen, administrator of the Labor Department's wage and hour division.

"Easy, clear rules mean employees will understand when they're entitled to overtime, employers will know what their obligations are and the Department of Labor will be able to more vigorously enforce the law," she said.

Union officials have said they would oppose any changes that would cause longer work weeks, because required overtime pay is the only brake stopping many employers from demanding excessive work hours.

"We're concerned that these rules could weaken the tradition of the 40-hour work week," said Kathy Roeder, spokeswoman for the AFL-CIO, which hadn't seen the proposal Wednesday night.

Under the proposal, any worker earning less than $22,100 a year automatically would be entitled to overtime pay, regardless of whether they are paid hourly or earn an annual salary.

Jobs most affected would be assistant managers of stores, restaurants and bars, McCutchen said. Those workers would get overtime pay despite their management status as long as they earn less than $22,100 a year. Companies also could decide to boost salaries above the cap to avoid paying overtime.

Employers could face $334 million to $895 million in direct payroll costs for those changes and overall costs of $870 million to $1.57 billion. Officials say increased productivity and fewer lawsuits could amount to savings of $1.1 billion to $1.9 billion.

White-collar professionals would take a hit in their paychecks. Generally, workers would be exempt in the new rules if they manage more than two employees and have the authority to hire and fire, or if they have an advanced degree or similar training and work in a specialized field, or work in the operations, finance and auditing areas of a company.

Officials say those requirements would exempt about 644,000 professional employees earning between $22,100 and $65,000 who now get overtime pay. That figure doesn't include another proposed exemption, for workers making $65,000 or more annually and meeting only part of the jobs duties criteria.

Employees who work under collective bargaining agreements negotiated by unions would not be affected.

Before issuing the final regulations, labor officials also intend to clarify the overtime status of many other specific jobs often at the center of legal disputes, such as journalists and reporters, funeral directors and loan officers.
By Leigh Strope
  • Lloyd Vries

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