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Rules for Overtime Pay to Take Effect

Sunday, August 22, 2004

After months of heated debate, a major revision, protests and an unsuccessful legislative assault, the most sweeping changes to the nation's overtime rules in more than 50 years take effect tomorrow.

Workers who earn less than $23,660 annually will become automatically eligible for overtime pay, a boost from the current threshold of $8,060, set in the 1970s. That change is "the most objective bright line standard" in the dense, complex regulations, said Tom Farmer, a senior consultant with Hewitt Associates, a human resources consulting firm. He predicts thousands of workers will begin earning overtime immediately because of the higher threshold.

But beyond that, interpreting the complicated, 154-page document still boggles many employers who must first understand the regulations and then translate the changes into new job classifications for employees.

"There is just going to be continued confusion," said Anita Raman, vice president of operations for PrO Unlimited Inc., which helps companies sort out employment regulations. "Employers really thought with the new law, 'I'll definitely be able to figure out who's exempt and who isn't.' They are still wandering around trying to figure out how to classify [employees] correctly."

Other than the higher threshold for automatic eligibility, every change in the new regulations means less overtime protection for workers, said a report released last month by John Fraser, Monica Gallagher and Gail Coleman -- three of the highest-ranking Labor officials under Presidents Ronald Reagan, George H.W. Bush and Bill Clinton. "More classes of workers, and a greater proportion of the workforce overall, will be exempt than we believe the Congress could have originally intended," they wrote.

But the Department of Labor argues otherwise. "Millions of workers in America will benefit from the Department of Labor's new, stronger overtime protections," Steven J. Law, deputy secretary, said in a conference call Wednesday.

The rules have been the source of political contention for months. The Senate voted to block the rules in May, in an effort pushed by Sen. Tom Harkin (D-Iowa). Sen. John F. Kerry (Mass.), the Democratic presidential nominee, has said he will repeal them if elected.

Yesterday, Sen. John Edwards (D-N.C.), the Democratic vice presidential candidate, denounced the new regulations in the Democrats' weekly radio address. "If you work hard, then you should be rewarded for that effort," Edwards said. "Why would anyone support this new rule, which could mean a pay cut for millions of Americans who have already seen their real wages drop again this year?"

The battle will continue tomorrow, when the AFL-CIO, along with workers and Harkin, will hold a rally on the steps of the Labor Department to protest the rules.

Salaried workers who fall between $23,660 and $100,000 a year might lose overtime based on a duties test, which describes the tasks that determine whether a worker can, for example, be classified as a professional ineligible for overtime. Those making more than $100,000 will lose their overtime rights unless they do not regularly perform professional, administrative or executive duties.

"It's really in that duties test that the really negative impact is being made," said Baldwin Robertson, a lawyer who works with the AFL-CIO. Robertson helped launch an overtime question-and-answer site called "Ask a Lawyer" at www.workingamerica.org.

For example, Robertson said, workers in the food industry who spend most of their time doing manual work, but sometimes instruct subordinates, could be overtime losers under the new duties test. Those workers can be reclassified as team leaders or as executives because they lead teams, or supervise two or more people, Robertson said.

Business groups have been proponents of the new regulations.

"These reforms provide clearer guidance to both employers and workers on their rights and responsibilities under wage and labor laws," Randel K. Johnson, U.S. Chamber of Commerce vice president for labor, immigration and employee benefits, said in a statement when the final rules were announced. "They also address many of the fundamental problems in the previous, outdated regulations that led to numerous compliance questions and needless lawsuits."

"We figure if they can find a way to take our overtime away from us, they will," said John Garrity, a naval electronics technician. Garrity, who earns about $5,000 in overtime a year that he uses to help support his wife and three children, believes the new rules would allow his employer to count him as a professional.

He testified in support of greater overtime protection before the Democratic Policy Committee after the first proposal in 2003 was released, although his employer has not told him he will lose his overtime.

Robertson and other labor organizations say registered nurses are in danger of losing their overtime because unclear language could reclassify hourly workers as salaried.

Terry Christle, a registered nurse at a hospital in Minneapolis, receives overtime, and might be one of those workers.

"I've read so many different variations that I'm not sure exactly how it'll impact me," Christle said. "But in general, I disagree with it."

Several groups have produced studies and reports pointing out what they say are loopholes in the rules through which many white-collar workers -- six million, according to Ross Eisenbrey, vice president of the labor-backed Economic Policy Institute -- could lose overtime.

But the Department of Labor disputes that analysis and says it changed the rules because they desperately needed updating. The old rules did not mesh with the new economy, causing increased litigation, officials argued. Overtime class-action suits have doubled since 1997 and outnumber discrimination suits for the first time. Labor recovered $212 million in back wages in fiscal 2003.

© 2004 The Washington Post Company
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