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Rules for Overtime Pay to Take Effect

Employers, Workers Confused by Regulations on Eligibility, Classification

By Amy Joyce
Washington Post Staff Writer
Sunday, August 22, 2004; Page A08

After months of heated debate, a major revision, protests and an unsuccessful legislative assault, the most sweeping changes to the nation's overtime rules in more than 50 years take effect tomorrow.

Workers who earn less than $23,660 annually will become automatically eligible for overtime pay, a boost from the current threshold of $8,060, set in the 1970s. That change is "the most objective bright line standard" in the dense, complex regulations, said Tom Farmer, a senior consultant with Hewitt Associates, a human resources consulting firm. He predicts thousands of workers will begin earning overtime immediately because of the higher threshold.

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But beyond that, interpreting the complicated, 154-page document still boggles many employers who must first understand the regulations and then translate the changes into new job classifications for employees.

"There is just going to be continued confusion," said Anita Raman, vice president of operations for PrO Unlimited Inc., which helps companies sort out employment regulations. "Employers really thought with the new law, 'I'll definitely be able to figure out who's exempt and who isn't.' They are still wandering around trying to figure out how to classify [employees] correctly."

Other than the higher threshold for automatic eligibility, every change in the new regulations means less overtime protection for workers, said a report released last month by John Fraser, Monica Gallagher and Gail Coleman -- three of the highest-ranking Labor officials under Presidents Ronald Reagan, George H.W. Bush and Bill Clinton. "More classes of workers, and a greater proportion of the workforce overall, will be exempt than we believe the Congress could have originally intended," they wrote.

But the Department of Labor argues otherwise. "Millions of workers in America will benefit from the Department of Labor's new, stronger overtime protections," Steven J. Law, deputy secretary, said in a conference call Wednesday.

The rules have been the source of political contention for months. The Senate voted to block the rules in May, in an effort pushed by Sen. Tom Harkin (D-Iowa). Sen. John F. Kerry (Mass.), the Democratic presidential nominee, has said he will repeal them if elected.

Yesterday, Sen. John Edwards (D-N.C.), the Democratic vice presidential candidate, denounced the new regulations in the Democrats' weekly radio address. "If you work hard, then you should be rewarded for that effort," Edwards said. "Why would anyone support this new rule, which could mean a pay cut for millions of Americans who have already seen their real wages drop again this year?"

The battle will continue tomorrow, when the AFL-CIO, along with workers and Harkin, will hold a rally on the steps of the Labor Department to protest the rules.

Salaried workers who fall between $23,660 and $100,000 a year might lose overtime based on a duties test, which describes the tasks that determine whether a worker can, for example, be classified as a professional ineligible for overtime. Those making more than $100,000 will lose their overtime rights unless they do not regularly perform professional, administrative or executive duties.

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