(The Kansas City Star posted the following article by Diane Stafford on its website on March 28.)
KANSAS CITY, Mo. — Major changes in the nation’s overtime pay regulations were proposed Thursday that the Labor Department says would expand overtime pay protection to an estimated 1.3 million workers.
But the AFL-CIO contends that the proposals would strip at least that number of other workers of their rights to overtime pay.
The U.S. Department of Labor’s Wage and Hour Division introduced a Bush administration plan to update overtime pay standards set by the 1938 Fair Labor Standards Act and a section added to it in 1949.
There will be a 90-day public comment period on the revisions, which do not need congressional approval. The Labor Department said the changes probably would take effect in late 2003 or early 2004.
“Updating these regulations is long overdue,” said Wage and Hour administrator Tammy D. McCutchen. “The types of jobs people do and the skills they need have changed” since the rules were enacted.
The proposal also raises for the first time since 1975 the pay threshold below which workers would automatically qualify for time-and-a-half overtime pay when they work more than 40 hours a week.
The pay threshold would jump from $155 a week to $425 a week. One effect of the change would be to reduce the number of low-income workers who currently are classified as salaried workers exempt from overtime pay requirements.
For example, a restaurant manager who works 50 hours a week for $15,600 a year would be guaranteed overtime pay rates for hours worked above a 40-hour workweek.
Currently, a worker classified as a manager who earns more than $8,060 a year would not be owed overtime pay under the law. The new overtime threshold would be $22,100 a year. Workers earning less would automatically be covered by overtime pay requirements.
But labor groups say the overhaul would thrust workers who earn between $22,100 and $65,000 a year into a category where it’s easier for employers to classify them as exempt and ineligible for overtime pay.
“We are concerned,” said Kathy Roeder, spokeswoman for the AFL-CIO in Washington. “We believe that the net effect will be that more people lose their overtime rights than gain them, but it’s impossible to guess exactly how many might be reclassified and eliminated from protection.”
Yvonne Ralsky, spokeswoman for the Labor Department in Washington, said outside economists have told the department that about 640,000 high-skilled, college-educated workers might fall into that category.
“But employers could still pay them overtime, even if they’re recognized as professional exempt,” Ralsky said.
The proposal calls for revisions in the complicated guidelines for determining whether a worker is classified as an hourly wage earner eligible for overtime pay or a salaried worker who is not.
“Right now, the rules are so difficult to understand that it’s easy for well-meaning people to come to different conclusions about it,” said Ron Bird, chief economist at the Employment Policy Foundation, a Washington research group that has for many years called for revisions in the law.
“It’s a reform that is long overdue because existing regulations were based on job descriptions and wage cutoff amounts that are far out-of-date.”
For example, the existing law covers such outdated job classifications as “straw bosses,” “keypunch operators” and “legmen.”
The Society for Human Resource Management said the proposed revisions should clarify the law and reduce the “number one question SHRM receives from its members, with over 8,000 calls on the issue in 2002 alone.”
A prime focus of the proposal, which will be published in the March 31, 2003, edition of the Federal Register, is to revamp the “duty test” used to determine who are salaried, or exempt, workers because of their executive, administrative or professional duties.
The proposed “executive duties” test would classify workers as exempt if they manage the enterprise, direct the work of two or more employees, and have authority to hire or fire or make such recommendations that are given particular weight.
The proposed “administrative duties” test would require a “position of responsibility.” That wording would replace a “discretion and independent judgment” test that has been the subject of continued litigation through the years.
The proposed “professional duties” test would exempt “learned professionals” who gain knowledge or skills through a combination of job experience, education and training. This test probably would remove overtime pay rights from some workers who now have them.
About 110 million U.S. workers are covered by the 31,000-word Fair Labor Standards Act. The proposed replacement takes only 13,000 words.
The administration said part of its intent is to simplify the complex standards and make it easier for individual employees and employers to work out pay arrangements that best suit their needs.
That flexibility, while a good thing for some workers, may hurt others. The AFL-CIO is among labor groups expressing fear that the proposed changes could threaten the 40-hour workweek.
The proposed changes would not affect workers who are covered by collective bargaining agreements negotiated by unions. But labor groups have long contended that the overtime pay requirement for hourly workers is the only barrier stopping many employers from demanding longer workweeks of their employees.
Labor officials estimate that the revisions would cost employers anywhere from $334 million to $895 million in direct annual payroll to cover the 1.3 million low-income workers who would be made eligible for overtime pay.
The department also estimates a price tag of $870 million to $1.5 billion on employers’ one-time costs for implementing the new rules. But employers could see equal savings because of fewer wage and hour lawsuits and greater efficiency under the new law, McCutchen said.
Many employment law attorneys have long said that no law is more consistently violated, whether by confusion or intent, than the Fair Labor Standards Act. Employees, employers and the courts frequently disagree on wage or salary classifications.