News > Economy
8 million may lose OT pay
Bush administration proposal would dramatically alter rules for paying overtime, study says.
June 27, 2003: 2:54 PM EDT

NEW YORK (CNN/Money) - More than 8 million workers in the United States will be ineligible for overtime pay under a plan proposed recently by the Bush administration, a research group said Thursday.

The Economic Policy Institute (EPI), a liberal Washington think tank, examined a proposal by the Labor Department to change the criteria for paying overtime and found that it would cost 2.5 million salaried employees and 5.5 million hourly employees their right to overtime pay.

How bad is it?
Historically speaking, unemployment could be a lot worse, but it should be an awful lot better (more)

The proposed changes, which were first introduced in March, will be implemented by the Labor Department after a "public comment" period, which expires on Monday.

The EPI questioned the appropriateness of the Labor Department's implementing such sweeping proposals without Congressional approval.

"There is no reason to believe...that Congress has authorized the Department of Labor to dramatically reduce coverage...taking overtime protection away from millions of workers," wrote the authors of the study, Ross Eisenbrey and Jared Bernstein. "Yet that is exactly what the Department of Labor has proposed."

Under current regulations, established by the Fair Labor Standards Act (FLSA) of 1938, about 79 percent of all workers are guaranteed the right to overtime pay, or time-and-a-half for every hour worked above 40 hours in a week.

Currently, there are three tests for whether or not an employee is ineligible for overtime -- the employee's level of pay, whether or not the employee is a salaried or hourly worker, and whether or not the employee performs certain job duties.

Under the current rules, any employee making more than $155 a week -- about $8,000 per year -- could be excluded from overtime, if they had a salary and a job description that fell into certain categories.

Related Stories
U.S. jobs jumping ship
Sleight of hand?
Job-search hell

The good news is that the regulations would raise that cut-off amount to $425 a week -- about $22,100 per year -- actually adding about 1.3 million lower-wage workers to the ranks of people eligible for overtime, according to the Labor Department.

But the EPI study said that gain is more than erased by the rest of the administration's plan.

For one thing, many workers earning a salary of more than $65,000 a year will now be excluded from overtime -- at least 1.3 million workers, according to the EPI study.

More critically, the job descriptions of millions of workers would be moved into certain "administrative," "professional" or "executive" categories that would exclude them from overtime.

For example, "learned professionals" are ineligible for overtime. Under the old rules, "learned professionals" were only those people who had scientific or specialized degrees. Now, work experience or technical training can be enough to make a worker ineligible for overtime.

In another example, "executives" ineligible for overtime, according to the old rules, were people who hired and fired workers, set wages and assigned work. The new rules broaden the definition of "executives" to include any workers who occasionally supervise other workers, even if they spend most of their time doing manual labor.

According to the EPI study, which used Labor Department and General Accounting Office data about worker pay and qualifications, the total effect of the three changes is to exclude at least 8.025 million workers from overtime -- and probably more, the study said, since the EPI only looked at 78 of the 257 "white collar" occupations identified by the Labor Department.

The proposal could also cause workers to work longer hours, since the Labor Department doesn't put any limit on the number of hours per week an employee must work, the group said in a study published on its Web site.

"Once employers are not required to pay for overtime work, they will schedule more of it," the study said.

The Bush administration has said the new rules are clearer and will lower the chance of employee lawsuits. The EPI study said the proposal could have the opposite effect.

"The proposed rule is rife with ambiguity and new terms...that will spawn new litigation," the study said.

The national labor organization AFL-CIO complained that the Labor Department had stifled public debate about the proposed changes.

For example, they said the Labor Department had canceled a union hearing on the issue, scheduled to take place June 30 in a Labor Department auditorium.

"The fact that Labor hasn't held any public hearings on their proposal to cut overtime pay, and that they have abruptly canceled the union movement's paid reservation to hold a hearing on the issue, is another sign of the administration's refusal to permit debate and dissent," AFL-CIO spokeswoman Kathy Roeder said. "It is a grave disservice to the millions of workers who stand to lose from the overtime proposal."

The White House could not immediately be reached for comment.  Top of page

  More on NEWS
JPMorgan dramatically slashes Tesla's stock price forecast
Greece is finally done with its epic bailout binge
Europe is preparing another crackdown on Big Tech
7 things to know before the bell
SoftBank and Toyota want driverless cars to change the world
Aston Martin falls 5% in its London IPO

graphic graphic