Today’s the day: new overtime regs take effect
Are you ready for the new overtime regulations? They’re effective today, August 23, 2004!
Read on for some links that will help you get up to speed on this key issue rapidly.
Get in the mood with this nice audio clip from NPR’s Morning Edition: “Gauging the Effect of Overtime Rule Changes: NPR’s Susan Stamberg talks with family issues commentator Bonnie Erbe about how the new rules are expected to affect workers at various income levels”
Note especially the reference to state law potentially being more favorable to employees.
Now, to get the scoop on the changes themselves and how they may affect you or your organization, I can think of nothing better than to get it straight from the horse’s mouth: the Department of Labor (DOL).
This agency continues its outstanding use of the Internet with a special “FairPay” homepage dedicated to educating the public on the new rules. From this homepage, if you really want to get a good crash course, I suggest doing the following:
First, check out applicable state laws. Here’s a list of state labor agencies to get you started.
Next, download or print the regulations themselves. (.pdf) (.html here).
Then, glance over this side-by-side comparison chart.
Review the regulations while watching the entire series of online video seminars (free of charge, available on demand; allocate 1 hour, 10 minutes).
Next, see if any of the fact sheets classified by exemption or occupation apply to your situation(s).
Consider adopting the model policy or a variant of it and incorporating it into employee handbooks.
Once you feel well-educated, begin reviewing job classifications. Start with those currently treated as exempt and verify if the exemption is still proper. Pay particular attention to those now automatically nonexempt due to the rate of pay.
Next, look at whether any classifications treated as nonexempt can be changed to exempt. Be sure to look both at the upper level pay rule and the duties tests applicable to employees in the middle-level. Before doing so, consider the practical implications:
Will this significantly cut pay, or were the employees in this classification typically not getting much overtime anyway?
If it would result in a pay cut, consider a salary adjustment to compensate. Employees whose take-home pay is directly cut will obviously be unhappy, potentially becoming less productive and more likely to leave.
Don’t forget to study the salary basis rules. The failure to meet the test for paying on a salary basis has trapped many employers who otherwise would have been entitled to treat employees as exempt.
As you are digging into this task, you may want to consult the DOL’s “E-law Advisor,” which will walk you through the exemption analysis step-by-step, including handy links to the definitions of various terms.
For a quick summary of all the latest political grandstanding over this issue (if you care), look at this from today’s New York Times: “Controversial Overtime Rules Take Effect” (by Steven Greenhouse)
For another politically-oriented piece that quotes our own Michael Harris and makes some good points, take a look at this from Mother Jones: “Last Chance for Overtime; Bush’s case for changing overtime rules has been discredited. So why can’t the Democrats stop him?” (by Bradford Plumer)
Some of the political haymaking is contrary to the claims of the DOL in its FAQ’s, which include a defense of such things as the treatment of working supervisors.
If you’re interested in this political/policy question of the likely impact of the new regs — for good and for bad, compare the infamous Economic Policy Institute (EPI) study, the latest version of which is here, with the DOL’s Economic Report
EPI says:
Altogether, we estimate that nearly six million employees will lose their right to overtime pay on the basis of just 10 of the many changes the final rule makes in these critical regulations. The total effect of the new regulation is undoubtedly greater. . . Read more
In contrast, DOL says:
The final rule will restore overtime protection for lower-wage workers, strengthen overtime protection for middle-income workers including first responders, and reduce costly and lengthy litigation. Both workers and employers will benefit from having clearer rules that are easier to understand and enforce. . . .
Specifically:
• Raising the salary level test to $455 will strengthen overtime protection for more than 6.7 million salaried workers who earn $155 or more and less than $455 per week regardless of their duties or exempt status.
• There are 5.4 million currently nonexempt salaried workers whose overtime protection will be strengthened because their protection, which is based on the duties tests under the current regulation, will be automatic under the final rule. This includes 2.6 million nonexempt salaried white collar employees who are at particular risk of being misclassified.
This is a key point. Many of the employees counted by EPI as nonexempt under the old rules have been erroneously treated by their employers as being exempt. They thus either gain by clarification that they are in fact nonexempt or lose nothing as a practical matter by being reclassified (in law but not fact) as exempt.
• There are 1.3 million currently exempt white collar salaried workers who will gain overtime protection.
• The final rule is as protective as the current regulation for the 57.0 million paid hourly and salaried workers who earn between $23,660 and $100,000 per year.
• An estimated 107,000 workers who earn $100,000 or more per year could lose their overtime protection from the new highly compensated test. . .
• Transfers from employers to employees, in the form of greater overtime pay or higher base salaries, are estimated to be $375 million per year.
• Raising the salary level test to $455 per week will strengthen overtime protection for 2.8 million salaried workers in blue-collar occupations, because their protection, which is based on the duties tests under the current regulation, will be automatic under the new rules. . .
• Updating and clarifying the rule will reduce the human resource and legal costs for classifying workers (particularly for small businesses), and reduced litigation could improve job opportunities.
• Updating the rule is an action forcing event and a catalyst for compliance. Employers who may not have undertaken an audit of the classification of their workforce will be more likely to do so after the promulgation of the final rule, resulting in greater levels of compliance . . . Read more
[Personally, I've got a radical notion: the whole doggone FLSA is a failed piece of social legislation that interferes with the ability of workers and employers to agree to mutually beneficial terms and conditions of employment. It is an effort to legislate away the free market; such efforts never work as expected and always produce gross distortions, inefficiencies, mass evasion of and disrespect for the law, and other unintended negative consequences. The FLSA has no better foundation in economic policy than New York's failed rent control law.
Some people prefer to work lots of overtime, whether at time and a half or regular time, just to make more. Others prefer a strict 40 hour week (or less). Others prefer to work whatever hours are needed in exchange for a higher salary, shot at promotion and/or a bonus or commission system of compensation.
All the struggles to define exemptions are part of a compromise between the desire to provide protection against exploitation of those at the bottom of the economic ladder and the needs of employers to contract with more skilled workers on mutually beneficial terms. The exemptions are designed to separate fungible employees, who can be readily replaced by others instead of being required to work overtime, from those with special functions that make them harder to replace and more needed for periodic stints of overtime.
As the economy changes, perhaps more employees fall within the latter category, as fewer work the more fungible factory line jobs and the like. So it is not improper as a policy matter for fewer workers to receive overtime, as such a change simply recognizes an increased need to provide flexibility to employers.
And all the whining from Big Labor is really bogus. Every union can -- and normally does -- negotiate overtime provisions more beneficial than federal law. If employees don't like the federal law, they should be sitting ducks for union organizing. So what exactly does Big Labor have to lose?
There, does that bit of ultra-right free-market ranting neutralize the link to Mother Jones?]
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