Will workers will suffer from new overtime rules?

Posted on Wed, Aug. 18, 2004
Opinion still divided on whether workers will suffer from new overtime rules
By Tony Pugh
Knight Ridder Newspapers

WASHINGTON - The deputy labor secretary on Wednesday defended new federal-overtime rules that take effect Monday from charges by organized labor that they will mean lower take-home pay for up to 6 million American workers.

The rules will strengthen, rather than erode, protections for workers' pay, Steven Law said.

The administration-drafted rules redefine the criteria that determine which administrative, professional and executive employees get federally mandated time-and-a-half pay after 40 hours.

Ultimately, how employers use the rules and how overtime is redefined will be hammered out in administrative judgments and courts.

A wide swath of occupations, including some registered nurses, nursery school teachers, store and restaurant managers, computer workers, funeral directors and chefs are likely to lose their eligibility for overtime pay.

On the other hand, the new rules guarantee that anyone earning $23,660 a year or less is eligible for overtime. Until now, only workers who made less than $8,060 a year qualified automatically. The administration says 1.3 million lower-income and "blue collar" workers in fields such as retail, manufacturing, food service and hospitality industries will gain from this change.

Other likely losers are in a new category of "highly compensated" workers who will be exempt from overtime pay. They earn at least $100,000 annually and perform some administrative or executive duty such as managing one or more employees.

Police, firefighters and other "first responders," plus practical nurses, health therapists and some military veterans, are exempt from the curb and are eligible for overtime regardless of their earnings. Also exempt - from any part of the rules - are union members who are working under collective-bargaining agreements.

Critics of the new rules worry that roughly 6 million workers, most of whom earn $23,600 to $100,000, could lose overtime pay depending on the way their employers interpret the rules and define their jobs.

A recent study sponsored by the AFL-CIO found that, with the large exception of the higher-income threshold for overtime eligibility, "in every instance where the department has made substantive changes to the existing rules, it has weakened the regulatory criteria for, and thereby expanded the reach and scope" of exemptions that make employees ineligible for overtime pay.

"They certainly have a different view of the rules than we do," Law responded.

Many think the new rules simply make the overtime exemptions easier to understand and apply, said Liz Snyder, an employment law consultant with Hewitt Associates, a human resources-consulting firm in Lincolnshire, Ill.

"I think they clarify and modernize the exemptions," said Snyder, who advises companies on how to comply with the new rules. "The intention is not to erode overtime protections, and it doesn't appear that they're doing that."

Karen Dulaney Smith, a wage and hour consultant in Austin, Texas, said there were problems in the fine print of the new rules.

For example, the rules redefine which workers are salaried professionals exempt from overtime pay.

Under the old overtime rules, registered nurses were considered professionals, but because most were paid hourly wages rather than on a salary basis, they were deemed eligible for overtime.

The new rule allows earnings for professionals exempted from overtime to be "calculated on an hourly, daily or shift basis." That could allow employers to halt overtime even for registered nurses who are paid by the hour, according to a number of labor groups who banded together as the Coalition to Preserve Overtime Rights for Registered Nurses.

The threat worries Philadelphian Charles O'Donnell. He's a registered nurse and father of four who works 16 to 20 hours of overtime each week at Thomas Jefferson University Hospital in Philadelphia. The extra hours boost his annual earnings from $60,000-plus to more than $90,000.

He needs the extra money to pay $1,700 a month in child support for his four daughters because the court based his payments on his overtime-fueled income from the past six years.

"It locks me into needing that overtime in order to live," said O'Donnell, 44. "If I couldn't work that overtime and wasn't able to meet my bills and child support, I go to jail."

Phyllis Fisher, a Jefferson hospital spokeswoman, said there were no plans to alter any nurses' overtime status. But Smith, the Texas wage and hour consultant, said that could change if competing hospitals cut back overtime. In that case, Jefferson might have to do the same.

"Or they won't be able to compete," she said. "They're going to be in a situation where other employers are going to take advantage of the new possibilities and they can't."

Eve Markewich, a partner with Blank Rome, LLP, a national labor law practice in New York, said she was advising her corporate clients not to use the new regulations to cut overtime pay.

"We're telling people that taking away benefits that employees already have is always a very difficult and ill-advised thing to do," Markewich said. "The reality is that most employees won't stand for it."