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New Overtime Rules Spark Debate

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Paychecks could surge or shrink for a few or for millions of workers across the country starting Monday, when sweeping changes to the nation's overtime pay rules take effect.

Some facts and figures concerning the new laws are listed at the bottom of this story.

There is little agreement by the Bush administration, employer groups, labor experts and others on how many workers will gain or lose the right to overtime pay under the new rules in the Fair Labor Standards Act.

"To be candid, no one knows," said Jerry Hunter, a labor lawyer at Bryan Cave LLP in St. Louis and former general counsel of the National Labor Relations Board during the first Bush administration.

Employers have sought changes for decades, complaining the regulations were ambiguous and out of date, and questioning why highly paid professionals should get overtime pay. Labor unions, however, say the new rules are intended to reduce employers' costs by cutting the number workers who are eligible for overtime pay.

Critics charge as many as 6 million American workers could be hit hard by the new rules, a figure disputed by an economist who supports the White House effort.

"That is a scare tactic," Tim Kane, an economist at the Heritage Foundation, tells CBS Radio News. "By our study at the Heritage Foundation, a million people will actually gain. Now we do estimate 300,000 workers will loose over time."

The major overhaul, the first in more than half a century, is aimed at mostly white-collar workers. The Labor Department says manual laborers and other blue-collar workers will not be affected.

The new rules are intended to limit workers' multimillion-dollar lawsuits, many of them successful, claiming they were cheated out of overtime pay for working more than 40 hours a week.

Retailers, restaurants, insurance firms and banks have been targets, and jobs in those places are generally exempted from overtime in the new rules. They include chefs, pharmacists, funeral directors, embalmers, journalists, insurance claims adjusters, low- and midlevel bank managers and dental hygienists.

Whether the new rules will reduce litigation is questionable, experts said. Lawyers representing workers have found the suits lucrative.

"This has become a very big area of plaintiffs' employment law, and it is not simply going to go away because of these new regulations," Bill Schurgin, a labor lawyer in the Chicago office of Seyfarth Shaw.

Critics say the changes will eliminate overtime for millions of middle-class Americans struggling in a weak jobs market.

"These are drastic changes that will hurt working families," said Karen Nussbaum, executive director of Working America, an AFL-CIO organization created for workers unable to join unions. The AFL-CIO is holding a protest outside the Labor Department on Monday.

Labor Secretary Elaine Chao has created a task force that will be "looking very closely and critically at any reclassifications that result in workers losing their overtime status," said Steven Law, deputy secretary.

No new funds have been added, but the department's Wage and Hour Division "will be very, very carefully monitoring and following up with enforcement," especially in high-violation industries, he said. The department won $212 million in back wages for overtime violations in 2003, a 21 percent increase.

At Denver Water, a public utility, none of the 1,050 employees will be reclassified, said benefits manager Jim Crockett.

"We were in compliance before, and when I analyzed the jobs for the new rules, it came up that no changes were necessary," he said.

When in doubt, the utility classifies workers as overtime-eligible, Crockett said. For example, its survey chiefs are in the field only during only summer months supervising crews; the rest of the year they oversee few workers, if any. But the chiefs are given overtime status, he said.

About 107,000 white-collar workers now eligible for overtime pay who earn $100,000 or more annually could lose it under the new rules, the Labor Department said.

About 1.3 million workers, mostly low- and midlevel managers at stores and restaurants, who earn less than $23,660 a year will be newly eligible. However, employers can avoid paying them overtime by raising their salaries, so critics say far fewer will benefit from overtime.

For white-collar workers who fall between those salary levels, their overtime status depends on their job duties and experience. The rules revamp the definitions of professional, administrative and executive employees, called "duties tests," that are used to determine eligibility.

Executive employees had authority to hire and fire. The new rule expands that provision, saying an executive can make recommendations that carry weight regarding employment status.

Labor leaders say slight changes in wording could exempt millions from overtime pay. The Labor Department says duties are more clear and make status more certain, resulting in "few, if any" losing overtime.



The Labor Department refers to the changes as the "FairPay" rules.

Who does it help? Who does it hurt?

  • There is significant disagreement about how many people the changes will affect.
  • The Labor Department says as many as 107,000 workers could lose overtime eligibility but about 1.3 million will gain it.
  • However, the Economic Policy Institute -- a liberal Washington think tank -- says 6 million people will lose overtime and only a few will gain it.
  • The law comes after decades of lobbying by business groups facing major lawsuits about overtime.
  • Among those are: Wal-Mart, Starbucks, Radio Shack, Rite Aid and Bank of America.
  • Labor Secretary Elaine Chao says the new rules will help stop needless litigation because they clarify who's entitled to overtime.

    Overtime 101

  • The 1938 Fair Labor Standards Act set the current standards for pay and overtime and covers about 115 million workers.
  • That law requires employers to pay no less than minimum wage $5.15/hour for all hours worked.
  • For every hour worked above 40 hours in single workweek, the law mandates that employers pay one-and-a-half times the regular rate of pay.
  • But, that law has always had exemptions for certain professions and classes of workers -- meaning some employers do not have to pay time-and-a-half.

    Who gains overtime under new law

  • Workers earning $23,660 or below automatically must receive overtime now. That raises the income bar.

    Who could lose overtime under new law

  • White-collar workers earning $100,000 or more a year.
  • In addition, people from a number of professions identified as generally exempt from overtime: pharmacists, dental hygienists, physician assistants, accountants, chefs, athletic trainers with degrees or specialized training, computer system analysts, programmers and software engineers, funeral directors, embalmers, journalists, financial services industry workers, insurance claims adjusters, human resource managers, management consultants, executive and administrative assistants, purchasing agents and registered or certified medical technologists.
  • Employers are told to make decisions on a case-by-case basis.

    Nurses

  • Registered nurses who are paid on an hourly basis should receive overtime.
  • Those who are paid on a salaried basis, earning more than $455 a week, no longer have to be paid overtime under federal law.

    Emergency workers & unions

  • Emergency workers (including police, firefighters and rescue personnel) will continue to get overtime. The new law clearly states those workers cannot be exempted from overtime.
  • Union workers covered by contracts will not be affected by the change. But organizers say the new rules will make bargaining more difficult when contracts come up for renewal.
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      David Hancock is a home page editor for CBSNews.com.