Another overtime update

First, the latest about overtime reform from the political front: ( “House Blocks Overtime Vote Sought by Dems” (Guardian Unlimited (AP- Leigh Strope)

House Republicans rebuffed a Democratic attempt Wednesday [May 12, 2004] to force an election-year vote on the Bush administration’s new overtime pay rules.

The vote, 222-205, blocked a move by Democratic Rep. George Miller of California to force the House to take sides on the controversial issue. Miller sought a vote on a provision to require the new regulations to retain eligibility for all workers who currently qualify for overtime pay. . . .

The GOP-controlled Senate approved a similar measure last week. The Labor Department rules were issued last month and take effect in August.

Had Miller succeeded, the overtime vote would have been largely symbolic, and would not have changed the new regulations. But it would have forced members of Congress to take a stand in an election year on a pocketbook issue important to many voters. . . . Read more

Now here’s what the AFL-CIO has to say about the new regulations: “Protect overtime pay for all workers” (by John Sweeney, special to the Atlanta Journal-Constitution)

The new overtime regulation . . . could strip millions of workers of overtime pay eligibility. . . .

The Bush overtime plan contains numerous provisions that threaten overtime rights for currently covered workers earning as little as $23,660. The Bush administration, on the other hand, claims that workers earning between $23,660 and $100,000 will not lose their overtime rights. There is a simple way to settle the matter. Congress can and should enact legislation to guarantee that workers who are entitled to overtime pay under current rules will not lose their overtime rights under the new rule.

I’ll go for that, as long as it also includes a safe harbor for employers: workers who are not currently receiving overtime pay will not be entitled to such pay in the future (or to recover back pay) absent a change in circumstances. This would really put the debate to the test.

Do Sweeney and all the other naysayers really think employers will respond to the new rules by yanking overtime from employees currently receiving it more than they will grant overtime to those currently not receiving it?

My guess is the net outcome will be much more realization by employers that employees have been improperly regarded as exempt, and adjustment by granting them overtime, than deprivation of overtime presently being paid, which, after all, is a cost of labor already factored into operations and an element of employee compensation deprivation of which will have adverse morale and turnover consequences. Do they really think employers are going to, in effect, start cutting employees’ pay left and right, just because the law permits it?

Back to Sweeney:

[T]he Bush administration has not linked the salary caps for overtime to inflation, which means that many more workers will be pushed out of receiving overtime pay in coming years as earnings increase. . . .

This is a valid criticism, to the extent earnings increases are inflation-based only, as opposed to real earnings increases. A built in COLA (cost-of-living-adjustment) indexed to CPI would have been a good idea.

Sweeney again:

In fact, the Bush overtime plan contains a surprising number of ambiguous provisions whose precise impact will depend on the outcome of litigation. One thing we can predict with some certainty is that the regulation will result in a deluge of lawsuits. This is ironic, since one of the administration’s main justifications for its overtime revisions is to clarify the rules and reduce litigation. Moreover, if these lawsuits are resolved in favor of employers, the impact of the regulation on workers will obviously be much greater. . . .

Yes, there will continue to be litigation, but it is questionable it will be worse than before, and certainly unlikely employers will win all the cases.

Sweeney concludes:

An overtime guarantee would give workers the peace of mind of knowing that they will not be losing their right to overtime pay, and it would calm the intense political passions that have been stirred by the Bush plan. We think President Bush should be for that. Read more

The pot calling the kettle black? What chutzpah — stir up the “political passions” with class warfare rhetoric, and then expect the opposition to buckle, in order to “calm” the situation you caused!

And not one word about the careful consideration to an unprecedented volume of public comment on the originally proposed regulations, and the resulting significant changes, largely favorable to employees!

Another story from last month, “Overtime plan still under fire; Labor vows to continue fight against new rules,” by Diane E. Lewis for the Boston Globe, quoted Christine Owens, AFL-CIO public policy director, as saying: “We hold open all of our options, one of which would be litigation,” “If we determine after looking at the regulations that it makes sense, we will file a lawsuit.”

Why don’t you look at them first, before breathing a word about a lawsuit, thank you very much.

The same article quotes Tammy McCutchen, administrator of the Labor Department’s Wage and Hour Division, as saying that”the Labor Department was unfairly accused of attempting to strip workers of overtime. ‘This final rule will put that issue to rest,’ she said. ‘We have been responsive to all the major comments: If you are paid by the hour, no matter your duties, you will get overtime.’” Read more

Of course the issue isn’t hourly workers, but salaried, and obviously this rule has put nothing to rest. The flip side, however is that even if you are not paid by the hour, but on a salary, you may still be entitled to overtime based on your pay and duties.

This is nothing new, but for years far too many employees and employers alike have assumed all salaried employees are exempt.

For this reason, if all the hoopla over the new rules causes more attention to be paid to this overlooked issue, and salaried employees who have always been entitled to overtime finally start receiving it, more, not less, employees will get overtime pay as an indirect result of the rules.

Here’s another article on the complaints about the new rules, by Leigh Strope, who does nice work writing about labor issues for AP (here via San Diego Union Tribune): “Democrats say white-collar workers will lose under overtime overhaul”

Democrats are challenging the Bush administration’s overtime pay overhaul, saying many white-collar workers will lose premium pay despite election-year promises that the effects will be minimal.

The new regulations . . . specify a number of white-collar jobs that will be exempt from overtime pay eligibility. They include pharmacists, funeral directors, embalmers, journalists, financial services industry workers, insurance claims adjusters and human resource managers. Others are management consultants, executive and administrative assistants, dental hygienists, physician assistants, accountants and chefs. Even athletic trainers with degrees or specialized training, computer system analysts, programmers and software engineers generally will be exempt.

How many of these have traditionally received overtime, anyway?

Labor Department officials say those jobholders are not eligible for overtime anyway, based on case law.
“Few, if any,” workers will lose overtime eligibility, Labor Secretary Elaine Chao said. . . .

“For most of these jobs, there is some law on both sides,” said Mark Wilson, a lawyer for the Communications Workers of America union who specializes in overtime issues.

Good, so I guess there is clarification going on here.

Chao said about 107,000 white-collar workers earning $100,000 or more a year could lose their eligibility. That is fewer than in a draft proposal 13 months ago that estimated that 1.5 million to 2.7 million workers “will be more readily identified as exempt.”

Also, about 1.3 million lower-wage white-collar workers will be newly eligible for overtime, she said. “Workers will clearly know their rights and employers will clearly know their responsibilities,” Chao said. . . .

Workers gaining overtime protections include lower-wage retail and restaurant managers. Middle-income workers such as office workers, cooks, inspectors, paralegals, licensed practical nurses and technicians “will have their rights better protected,” the department said. . . .Read more

Predictably, some favorable reactions from the employer side have been recognized. “Retailers Welcome New Overtime Regulations” is About.com’s summary of an April 20, 2004 National Retail Federation press release

Two sound bites:

“We know this isn’t the end of the political battle”

“The idea that this is an attempt to take overtime away from anyone it was intended to cover in the first place is just plain fiction.” Read more

And here is the “American Payroll Association’s Response to New DOL Overtime Requirements”

Significantly, matters can be more complicated in states that have overtime laws that go above and beyond merely extending the federal rules to otherwise uncovered employers.

Here are a few local stories pointing this out in 3 states:

“Overtime Changes Spark Confusion in Some States” (WDJT TV Milwaukee - AP)

New federal overtime regulations won’t automatically take effect in 18 states, including Wisconsin.

The issue is provoking widespread confusion among state officials, employers and workers, and sparking political battles over how to respond.

Wisconsin and the other 17 states have their own overtime rules, some of which are the same as the old federal rules being replaced in August. Read more

LABOR: “Overtime changes spark confusion; Rules won’t take effect immediately in some states, including North Dakota, Minnesota” (Grand Forks Herald - AP)

Mark Bachmeier, North Dakota’s labor commissioner, said the federal rules will expand workers’ eligibility for overtime. Because of the way North Dakota’s regulations are structured, no one who may now collect overtime will be ineligible as a result of the federal rules, he said. Read more

“California overtime rules trump federal laws” (Palm Springs Desert Sun - Gannett)

New federal laws determining who is eligible for overtime pay won’t affect California workers. That’s because California companies have a higher state hurdle to clear if they want to avoid paying overtime to workers, state and federal officials said. . . .

With attention focused on the national overtime rules, the state’s industrial relations agency is trying to reinforce to California companies that they must obey the state rules . . . . Even companies with headquarters in other states must obey state laws at their California operations . . . .Read more

Now, in conclusion, what’s the reality here: big Bush administration ripoff of poor working families or mere clarification and modernization of outdated rules? And what’s an employer to do?

On the first question, I’ll just say this. I listened to an hour and a half telephone seminar on the new rules put on by the ABA Section of Labor and Employment Law. it had a DOL representative giving the party line, and attorneys for both employee and employer perspectives. There was little to no argument when the DOL guy said — as he often did — something like “this just codifies existing case law.” Basically, compared to the Beltway (politician) types, these folks don’t seem to think this is a huge big deal.

On the second question, the Blue Ridge Business Journal article “New law: Who gets overtime? Will employees’ rights be strengthened or will workers lose valuable overtime pay? Depends on whom you ask” (by Deborah Nason) offers a few practical tips:

1. A job-by-job review to ensure that all jobs are properly classified.

2. Revisions of policies to take advantage of “safe harbor” and other new provisions.

3. Development of a communication strategy to help . . . employees understand who is affected, and to convey that any resulting changes in exemption status “have no bearing on their worth as an employee.” Read more

OK, that last point is kind of stupid. If you change someone from nonexempt to exempt, you may be boosting their “status” while cutting their take-home pay. Does that reflect on their “worth as an employee”? You bet, negatively.

I’d say exercise caution about going nonexempt to exempt. Just because you can do it doesn’t mean you should. If you do, compensate with a pay raise. This is an employee’s pay package you’re fooling with, and if you want them to stick around, have good morale, and be productive, . . . .

Going exempt to nonexempt? Now is the perfect time to use the new rule as an excuse to clean up your act on the people who you may have misclassified as exempt. They might be so happy to start getting overtime they don’t ask too many questions about why they didn’t before. . . .

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