Outten & Golden: Empowering Employees in the Workplace

Mixed Bag on Overtime in Final Version of Administration Proposal

April 20th, 2004 | Paula Brantner

Today the Administration released its long-awaited overtime proposal, which is sure to satisfy hardly anyone at this point. Those who have fought the implementation of this proposal long and hard are still convinced that it will harm many more workers than it benefits, while those looking for the hard line the Administration took in the original proposal are unlikely to welcome some of the concessions made in this final product. Will the proposal accomplish its desired goals of modernizing outdated law and reducing the amount of litigation? Probably not, given the rancor generated already in this battle and the questions remaining to be answered. It also remains to be seen whether the changes will influence the presidential election: will the concessions win back votes for the Bush Administration?

For over a year, this day has been long awaited. Last spring, the Administration released a proposal for comment that would modify a decades-old statute, the Fair Labor Standards Act (FLSA). Critics of the existing law claimed that it led to too much confusion for employers, causing needless litigation, and that many of its provisions had become completely outdated through the passage of time and the transformation of the job market. The critics were mostly right: workers at the lowest end of the pay spectrum found themselves subject to complicated analyses of their job duties, because the simple salary-based test of whether low-wage workers were entitled to overtime was set so low as to be meaningless, at $8,060. And some well-meaning employers were undoubtedly ensnared in some of the more confusing aspects of the law.

However, the original proposed solution was akin to using a sledgehammer when a flyswatter was needed, given that it was certainly possible to amend the FLSA in a way that would continue to protect the workers and industries most reliant on overtime and where the most abuses were likely to be found, without completely altering the balance between employers’ needs for more bright-line guidance and employees’ needs for the overtime structure to increase income and/or provide work and family balance. As covered in previous editions of Today’s Workplace, the American workforce reacted strongly, helping to generate approximately 80,000 letters to the Department of Labor concerning the original proposal. Both houses of Congress separately voted to stop the proposal, which would otherwise go into effect without any legislative ratification necessary; however, Congressional leadership and the Administration conspired from preventing these measures from going forward to become law. As time passed, it became fairly clear that the Administration’s overtime proposal would go into effect: the only question became whether there would be any changes from the original proposal at all, or whether some of the most objectionable provisions would be deleted or modified.

Today, Labor Secretary Elaine Chao trumpets the release of the new overtime proposal, dubbed the “FairPay Initiative.” According to Secretary Chao, “Today, workers win. The department’s new rules guarantee and strengthen overtime rights for more American workers than ever before.” (See DOL Press Release.) Chao’s real agenda becomes apparent, however, when she also claims: “With the ‘FairPay’ rule, we are restoring overtime to what it was intended to be: fair pay for workers, instead of a lawsuit lottery.” Given the Administration’s vigorous advocacy on behalf of this measure, these comments are not particularly surprising. What may be a little more so, however, are some of the changes from the original proposal. (See FairPay Regulations.)

The regulations guarantee overtime pay to 1.3 million low- income workers making less than $23,660 a year (up from $22,100 in the original proposal) and raise the ceiling for workers to qualify for time-and-a-half pay from $65,000 to $100,000, depending on their job duties. The regulations will protect the right to the extra wages for manual laborers, registered nurses, police, firefighters and other first responders, and the administration removed a provision that could have affected veterans, who had hotly objected to a provision in the original proposal that designated military experience as one of the kinds of “professional” experience that could exempt positions from overtime pay. (See Bloomberg News story.)

Why were these particular changes made? It’s no real secret that those on the front lines in health care and public safety were the most convincing advocates for preserving the present system, as labor shortages and mandatory overtime in these fields are already such a systemic problem that many have begun to question whether public safety is at risk when these workers are stretched too thin. And no one wants to attack veteran workers at a time when their ranks will increase dramatically once the conflict in Iraq has ended and those part of the active military and reserves return to the workforce. While the change to the lower salary guideline is not so much to be terribly significant, the change to the upper salary guideline, a $35,000 increase, has some potential to be meaningful to workers who even at $65,000 were decidedly middle-class workers, especially in some of the more expensive regions. The changes seem calculated to win political support in an election year, by blunting the most harsh impact on those who serve on the front lines in the war against terrorism. One commentator, Larry Lorber, representing the U.S. Chamber of Commerce, noted as such: “What happened in some respects, because it’s an election year, the Congress was under a lot of pressure. The Labor Department cut back dramatically on the number of folks they said would lose overtime status.” (See Chicago Tribune article.)

If so, is anyone really happy with the changes? To the extent that anyone has yet been able to analyze 500 pages of changes, certainly none are as happy as Elaine Chao, as most of the commentary has been relatively muted in its praise thus far from those most likely to support the Administration’s position. Comments Randel Johnson of the U.S. Chamber of Commerce, “Although we are disappointed in some of the provisions, these reforms provide clearer guidance to both employers and workers,” which is hardly a rousing endorsement. Camille Olson, a labor lawyer with the defense firm of Seyfarth Shaw, says “Folks aren’t going to look at these regulations and say this is a win-win for employers or for unions.” (See Bloomberg News story.) And labor groups, despite the concessions, remain dissatisfied with the proposal, and distrustful of the Administration’s motives. According to Bill Samuel, legislative director for the AFL-CIO, “The Labor Department has a history of greatly exaggerating the number of workers protected and understating the number of workers who would lose protection. The most embarrassing provision have been addressed in parts of this new rule. Many of the fixes look only partial.” (See Chicago Tribune article.) Sen. Tom Harkin (D-IA), who has spearheaded the effort in the Senate to stop the new provisions from going into effect, vowed to continue his fight if his review of the new proposal uncovered a large group of workers who would lose overtime protections as a result of this provision. (See Reuters article.) Harkin remains wary, however: “As we say in Iowa, you can put lipstick on pig, but guess what? It’s still a pig. Given this Administration’s track record, I remain skeptical and will need to read the fine print.” (See MSNBC article.)

The new overtime provision will take effect in 120 days: three key months during the election season. Will the changes be enough to satisfy those voting workers who objected to vast reductions in the number of workers protected by overtime laws? Will either party be able to successfully use this issue to influence a large number of voters this year? Only time will tell, but it is certain that the proposal will be dissected in countless ways in the days to come in an attempt to divine whose interests are best protected by the changes.

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