Change Has Firms Working Overtime
Many Grappling With Pay Status
By Amy Joyce
Washington Post Staff Writer
Wednesday, July 28, 2004; Page E03
St. Jude Children's Research Hospital in Memphis has been preparing for months for the changes coming next month in the federal rules governing overtime pay.
Mary Anna Quinn, vice president of human resources, said the hospital, which has 3,000 employees, followed the deliberation on the new rules from the beginning, making changes as they went through revisions and were argued over in Congress. Anytime a job changed or a new job was created, her department determined whether the employee was exempt from overtime pay.
The bottom line, Quinn said: Two workers in the technology department will start earning overtime for the first time.
At the University of Missouri in Columbia, meanwhile, 400 to 500 employees out of 19,000 full-time workers will start earning overtime after being reclassified under the new regulations, according to R. Kenneth Hutchinson, vice president of human resources. No employees will lose overtime pay, he said.
These two organizations might be in the minority, according to a new study. Human resources consulting firm Hewitt Associates found that 20 percent of 150 companies interviewed said they did not expect to be able to meet the Aug. 23 deadline for compliance. Twenty-three percent said they would be ready, but only -- like St. Jude and the university -- with additional resources focused on the effort.
About 26 percent of companies said their biggest challenge would be that existing job documentation is old, incorrect or inconsistent. Twenty-four percent of respondents said their primary challenge would be "understanding the new rules."
The new regulations have been the subject of great political controversy, with labor unions and Democrats in Congress trying to block them. The Economic Policy Institute estimates the rules will cause 6 million people to lose overtime pay, while the Department of Labor said very few people will lose the extra pay. The department said the rules were created simply to clarify existing regulations that have largely been in place for 50 years.
To become compliant, employers nationwide will have to reclassify employee job duties and titles to ensure proper pay under the new rules. Many employers will have to completely revamp complicated payroll processes.
Many employers did not begin the compliance process until recent weeks because it was unclear whether the efforts to kill the rules would succeed, according to Sandy Boyd, vice president of human resource policy at the National Association of Manufacturers.
"I think the notion that anyone is going to be fully compliant is impossible," said Lawrence Lorber, an employment lawyer with Proskauer Rose LLP. In fact, he said, there are many companies that still won't be meeting the new rules in 2006.
Companies have been hiring lawyers and human resource consulting firms and putting in extra hours to get ready for the changes. The NAM, for instance, has organized several seminars with the Department of Labor for its members. "There has been a lot of that kind of outreach . . . that has helped with the education curve," Boyd said.
The mix of employers that can meet the new requirements and those that cannot could mean more overtime lawsuits because of inconsistencies and confusion. Lawsuits in which employees accuse employers of forcing them to work more than 40 hours without extra pay have been on the rise in recent years, and those suits are a major reason Labor Secretary Elaine L. Chao gave for changing the rules. The Labor Department collected more than $212 million in back pay for workers last fiscal year, the most in a decade.
In addition, companies being too strict on exemptions could lose workers as employees leave for companies that offer overtime pay under the new rules, according to Tom Farmer, a senior consultant with Hewitt.
"There will be some occupations where employers will convert some of these people to overtime and other employers won't, and word will get around," Farmer said. "It will be hard to keep those people, or companies will be forced to explain what's going on."
One thing employers did not expect was that employees who became eligible for overtime pay might be resistant. Hutchinson of the University of Missouri said employees were concerned about their new status as non-exempt. "Unfortunately, [being exempt] was seen as a status issue or a level issue, so a number of our employees in these classifications are disappointed," Hutchinson said.
© 2004 The Washington Post Company