An early 'Happy Labor Day' from Washington?

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July 2003

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An early 'Happy Labor Day' from Washington?
Under revised overtime rules proposed by the Bush administration, over 8 million white collar workers, including some who earn as little as $22,100 per year, could soon become ineligible to receive any extra pay when they work more than 40 hours a week. This is the conclusion reached in a new briefing paper released today by the Economic Policy Institute.

The report, "Eliminating the Right to Overtime Pay," is coauthored by EPI's vice president and policy director, Ross Eisenbrey, and its acting research co-director, Jared Bernstein. It critiques a Labor Department estimate that minimizes the impact of the proposed rules and provides a detailed description of the true impact of the changes. The public comment period on the proposed regulations officially ends on June 30 and the new rules could be in place by the fall.

The revised regulations, proposed by the Labor Department on March 31, would dramatically increase the number of workers whose jobs are classified as professional, administrative, or executive and therefore ineligible for overtime pay. This blurring of the lines between managerial and hourly staff, coupled with a downgrading of the educational standards required to exempt employees from overtime pay, will give employers a powerful incentive to switch millions of workers from hourly to salaried status in order to reap the benefit of a newly created pool of unpaid overtime hours.

"The administration's proposal would create, in effect, a massive subsidy to employers paid for by their employees," said Eisenbrey. "As more employers take advantage of the new rules, it will create a rush-to-the-bottom pressure that will eventually force even reluctant employers to participate in order to keep their labor costs competitive."

Among those who stand to be affected by the changes are workers with little more than a high school diploma, little or no on-the-job discretionary authority or responsibility, and frontline supervisors who spend most of their workday doing the same tasks as those they supervise. Under the new rules they could be reclassified as executive or administrative employees who would no longer be able to claim extra pay for hours worked above 40 per week.

The proposal would greatly lessen the amount of education required for a worker to be categorized as a "learned professional" and therefore ineligible for overtime pay. The new definition would no longer require a degree beyond a high school diploma for this classification. Work experience or military training may substitute for academic training, but the proposed rules do not establish a minimum amount of such experience or training.

Similar loosening of how executive and administrative functions are defined and how much of a job must be devoted to such duties gives employers wide latitude for redefining many jobs as ineligible for overtime.

In one area, the administration's rules represent an improvement: they raise the minimum pay level below which overtime eligibility is automatic. This change, however, is more than counterbalanced by other changes in eligibility rules. In the new work world defined by these new rules, any worker who earns $425 or more a week, supervises two or more employees, and has a minimal amount of training or experience beyond high school is more likely to be denied overtime pay.

The kind of jobs affected by the new rules cover a wide range. Among the specific occupations the authors cite as fields where overtime eligibility will decrease are: paralegals, emergency medical technicians, Licensed Practical Nurses, draftsmen, surveyors, reporters, technical writers, bookkeepers, dental hygienists, lab technicians, cooks, factory supervisors and set-up workers.

The harshest impact will be felt, of course, by workers who are now receiving overtime pay and will no longer be able to do so. Changes proposed by the administration are likely to bump millions of workers who are now eligible to receive overtime pay into exempt status; not only will they not receive time-and-a-half after 40 hours of work, they won't even receive any extra straight time pay for their overtime hours.

"Under the guise of modernization, the Bush administration is threatening to gut the right to overtime pay for millions of workers," said Bernstein. "This seemingly innocent set of rule changes will lower the incomes of working families, many of whom depend on overtime pay to make ends meet."

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