The Bush administration plans to unveil today a proposed overhaul of federal rules about overtime pay, Labor Department officials said. The changes would add an estimated 1.3 million low-wage workers to those automatically eligible for extra pay if they work more than 40 hours a week, but it could also remove hundreds of thousands of higher-paid workers from eligibility.
Under the plan, workers earning up to $22,100 a year would automatically qualify for overtime pay, up from the current ceiling of $8,060. At the same time, the proposal would make changes in job classifications for executives, administrators and professionals -- groups of employees who are considered "exempt" from overtime pay.
Business groups have long complained that the current 54-year-old rules are antiquated and geared toward a manufacturing-based economy rather than one that is based on information and technology.
"We want to see a lot more clarity, and we want to see a proposal where very well-paid workers aren't considered eligible for overtime," said Randel K. Johnson, vice president of labor for the U.S. Chamber of Commerce. "No one can argue these regulations aren't overly complex and out of date and need to be reexamined."
Organized labor supports some change, particularly allowing more low-paid workers to be eligible for overtime. But labor leaders fear the net effect could be that more workers would lose overtime pay because of changes in job classifications.The proposal, which the administration hopes will be finalized by the beginning of next year, would revise rules issued under the Fair Labor Standards Act. The public will have 90 days to comment after the proposal is formally introduced.
Currently, about 70 million workers are entitled to overtime, either automatically or because they are in hourly jobs that are not considered administrative or professional. The regulations do not apply to workers represented by union contracts or to teachers, skilled computer professionals, farm workers or commissioned sales people.
Still, the rules have been the subject of more class-action lawsuits than any other labor issue, according to the Labor Department.
For example, a federal district court in Minnesota ruled last year that employees of a finance company who sell loans are entitled to overtime pay because they are considered production workers rather than administrative workers. Their employer had argued that their duties were anything but assembly-line or production work.
Every White House since the Carter administration has made attempts to overhaul the rule, and all have failed because of the complexity of the regulations and political infighting.
The proposal will simplify the complex tests to determine who is exempt from being paid overtime, said Tammy D. McCutchen, administrator of the Labor Department's wage and hour division. Under the current rules, a worker's classification depends on such considerations as his or her duties, how much judgment and discretion is exercised, and what educational credentials are required.
"We have updated, streamlined and clarified those tests," McCutchen said. "It's important for employees to know if they are entitled to overtime and it's impossible today to know because the rules are so outdated and complex."
Under the proposal, employees who manage a business, direct at least two employees, and have hiring and firing responsibilities would be considered exempt executives.
Similarly, to be considered an administrative employee not entitled to overtime, the worker would have to hold a "position of responsibility," and would have to have an impact on the operation or finances of the company. The new rule also would change the definition of a "learned professional," another class that now cannot collect extra pay. Instead of requiring an advanced degree, the new rule would recognize that many workers acquire skills in the military and at technical schools or community colleges.
Groups representing workers, such as the AFL-CIO, argued to the Labor Department during meetings leading up to the proposal that it should not change the status of workers collecting overtime to such professional categories if they truly were not white-collar workers with real autonomy and decision-making authority.