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8 million could lose overtime pay

Up to 8 million U.S. workers could lose their right to overtime pay if Bush administration rules are put in place, according to a new study released Thursday.
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Up to 8 million U.S. workers could lose their right to overtime pay if Bush administration rules are put in place, according to a new study released Thursday. The new proposed rules would dramatically change who qualifies as a salaried worker, and which hourly wage earners are able to collect overtime.

The report, by the Economic Policy Institute, highlights dozens of professions that would be impacted by the new rules and argues that hundreds of thousands of workers could be moved from hourly wages to a fixed salary. It would also expand the types of work responsibilities that can be barred from overtime, and would cap a right to overtime for almost anyone earning more than $65,000 a year.

The study’s numbers sharply contrast Labor Department estimates that 1.3 million low-wage workers would qualify for overtime under the new rules, while 640,000 professional workers would lose their potential for overtime.

Some 2.5 million salary earners and 5.5 million hourly employees would lose their overtime, according to the estimates by the group, which is affiliated with labor unions. [Another study released June 27 estimated that a far lower number — 1.16 million at most — would stand to lose overtime pay. The study by the Employment Policy Foundation, a Washington group funded by employers, argued that current employment trends require an overhaul of the rules.]

Some of the most impacted job types are likely to include: mid-level supervisors such as restaurant managers or safety inspectors; professionals such as dietitians, social workers and writers; and technical specialists, such as dental hygienists, drafters or computer programmers. The report’s authors argue the new rules would lead to longer hours for most employees with minimal cost to companies.

“That will have a big impact on their personal family budgets and also on their hours of work,” said EPI vice president and policy director Ross Eisenbray. “It’ll be more profit, but it won’t end up in worker paychecks.”

The proposed regulatory changes, which amount to an overhaul of the federal Fair Labor Standards Act, were first released last March by the Labor Department. A public comment period ends Monday, though no public hearings were scheduled. They could be implemented as soon as this fall and the administration wants them in place by next year. If so, it would be the first major overhaul of the overtime rules in nearly 30 years.

Among those changes would be to raise the baseline salary under which all employees qualify for overtime. Right now, standards still employ a figure from 1975: Anyone earning less than $155 per week automatically qualifies. The new rules would raise that to $425 per week, or about $22,000 a year.

New categories
According to the study, the changes’ real impact would be in how workers are defined:

Some employees are currently exempt because they hold advanced degrees or did postgraduate study. But most white-collar workers with any education beyond high school would be placed in a category of “learned professional” and would likely be exempt — unable to earn overtime. Many “learned” professions would now allow on-the-job experience to replace academic training: chefs or practical nurses might be exempted from overtime because academic study is largely vocational in nature. The Labor Department argues that would simply give credit for “equivalent knowledge and skills” gained outside academic programs.

Workers would no longer be required to exercise decision-making and judgment in order to be considered a professional, or to mostly do “production” work in order to gain overtime rights. Instead, an employee considered to be in a “position of responsibility” could be made exempt.

Overtime exemptions for “executive” employees would be expanded to many lower-level supervisors who manage just a handful of employees, such as fire sergeants or retail sales supervisors. Even employees who mostly perform routine, non-exempt tasks can still be made exempt. In one example the study cites, someone who stocks shelves could be considered an exempt employee if they also spend some time handling customer complaints.

Impact on payrolls
The Bush administration and business groups argue the changes are necessary to reflect a growing service sector in the economy, and to spur economic growth and hiring practices. Among the arguments is that by paying less overtime to more highly skilled workers, employers would have more money in their payroll to hire new employees and reduce the unemployment rolls.

Many businesses also support the Labor Department’s argument that the new rules will simplify how workers are segmented based on the type of work they do. Some business owners, for example, would like to see an end to the “production dichotomy” — the split between workers who “produce” and those who supervise. Those divisions, they argue, are representative of the labor act’s 1939 origins in an industrial economy and don’t reflect modern times.

“That makes sense if you think of an assembly line. It doesn’t make much sense if you think of a service economy,” said Michael Eastman, director of labor law policy for the U.S. Chamber of Commerce . “How do you take regulations written in the 1940s and try to apply it to your webmaster?”

Organized labor, meantime, has been on a vocal campaign against the new rules, arguing they would not only hurt workers but would actually discourage hiring. The AFL-CIO, for example, believes the new rules — by increasing the number of salaried workers — would allow employers to shift more work onto salaried employees, extending their work hours without any cost to the company.

“Just because people may sit down all day instead of stand up doesn’t mean they should be expected to work 80 hours a week without overtime pay,” said AFL-CIO spokeswoman Kathy Roeder.

Roles blurring
In fact, the original purpose of the FLSA rules were to guarantee certain worker rights, both in establishing a minimum wage and in preserving a 40-hour work week — discouraging companies from overworking employees by imposing, in essence, a financial penalty. But if anything, Americans’ work week has kept lengthening, with U.S. workers now far outpacing their counterparts in the developed world.

And by one view, the new economy dictates that companies place more responsibility on their workers. One sign of that is what Charles Tharp, professor of human resource management at Rutgers University, calls a “a very jobless recovery”: firms increasing their productivity without growing payrolls at all. A single worker now has far more flexibility and personal responsibility — both of which can translate into longer hours, more work and some confusions about what a worker’s role should be.

“With more team-based organizational structures, with people managing themselves ... some of the old definitions around exempt and non-exempt have become rather blurry,” said Tharp. “It’s been a bit of a mess.”

Many companies agree the current rules have made for a bit of a morass, and they see the new regulations as helping to clear up some vague definitions, though they would like to push the Labor Department for even more clarity, which is an issue for them in stemming labor lawsuits.

Both sides, actually, are hoping for clarity through the rules, and both are glad to give workers credit for their skill sets. But the report’s authors worry that the credit being given for workers’ experience and increased autonomy will translate into a smaller paycheck.

“They’re trying to say that really there’s not a difference anymore between a professional engineer and the person that engineer supervises,” Eisenbrey said. “It’s true they do have a lot of skill and that’s a good thing. But it’s not a reason to deny them pay when they work overtime.”