New Rules Would Expand Salary Limits, But Effects Are Unclear
Earlier this week the Bush administration announced they would make revisions to the controversial new overtime pay rules introduced in March of last year. The current overtime rules have guaranteed millions of workers overtime pay for decades – money that accounts for a significant portion of their overall income. Under the Fair Labor Standards Act of 1938, almost 80 percent of workers are guaranteed time and a half for each hour they work over their mandatory 40 hours per week.

The original proposal the Administration announced last summer would have resulted in the loss of overtime pay for millions of Americans by increasing the number of employees automatically exempt from overtime benefits. The changes would allow employers to re-classify certain workers as managers, supervisors, or team leaders, thereby exempting them from overtime pay. Statements from the Department of Labor (DOL) originally claimed these changes would cause only 644,000 workers to lose their overtime pay. However, the Economic Policy Institute reliably estimated the real number is closer to eight million workers and that the administration had intentionally undervalued the impact. The DOL received 75,000 emails and letter last summer critiquing the proposed changes.

With the most recent changes announced this week, the salary at which employees become automatically exempt from receiving overtime was raised from the previously proposed level of $65,000 to $100,000. Like the original proposal, the new rules would also raise the bottom income level guaranteeing overtime eligibility from $8,060 to $23,660.

Despite the apparent improvements to the salary levels in these rules, it does not necessarily mean more workers will receive overtime pay protection. It is unclear how many employees who earn between $23,660 and $100,000 will be excluded from overtime pay because they now could be classified as manager, supervisor, or even “team leader” under the extensive new eligibility rules. Further, the rules would allow other job categories, such as pharmacists, administrative assistants, and chefs, to be automatically excluded from overtime and would expand the “learned professional” category by lowering education standards. All of these changes put power in the hands of employers and provide incentives for companies to cut the pay of average workers by excluding them from overtime.

The Administration claims these new rules will guarantee overtime to 1.3 million low-income workers who currently are not protected, but this number may be an exaggeration as many of those workers included in the 1.3 million could be exempt under other provisions in the rules. These new overtime regulations come just four months after the Associated Press reported the Bush Labor Department began “giving employers tips on how to avoid paying overtime to some of the 1.3 million low-income workers.”

Another negative aspect of the rules is that the income cap of $100,000 will not be adjusted for inflation under this proposal. Since it has been over 65 years since these rules have been updated, not including an inflationary adjustment will hurt additional workers in the future.

While the changes announced recently to the proposed rules are certainly a victory for advocates, unions, and the average worker around the country, both supporters and critics agree it will take significant time to evaluate all of the details in the 500 plus page proposal. Only then will Americans know whether these proposals, in the words of Labor Secretary Elaine Chao, “simplify regulations governing more than 100 million American workers,” or whether they are a move to help corporations and employers save money at the expense of hard-working Americans.

For More Information:
NY Times Article: Labor Deptarment Revises Plans to Cut Overtime Eligibility
Economic Policy Institute’s Overtime Pay Resource Page

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