Overtime rule changes long overdue

By now you’ve likely heard of the U.S. Department of Labor’s proposed revisions to the Fair Labor Standards Act, which is the primary statute governing employee entitlement to overtime compensation. The revisions primarily address the tests for determining whether employees are exempt from the law’s requirements.

These proposed revisions constitute major changes to a law that has been substantially unchanged since its enactment in 1938. They would substantially alter key terms and tests that have become outdated and are at times difficult to apply in the modern workplace.

The expressed goal in proposing these changes was to “simplify, clarify and modernize” the outdated regulations that were crafted when keypunch operator was a common occupation. The new regulations would alter the traditional “short/long” test, the work requirements under the “white collar exemptions” for executive, administrative, and professional employees, as well as two specific position exemptions (computer technology personnel and outside salespeople), and general revisions to disciplinary actions and the window of corrections allowed under the law.

Recently, the revisions have taken significant political blows as a result of intense lobbying by opponents who believe the changes will eliminate overtime pay to millions of Americans.

The first blow came when the Senate voted to defeat the rule changes in an amendment to the 2004 Labor, Health and Human Services and Education appropriations bill that would have prevented the Department of Labor from spending money to implement the new changes. Sen. Tom Harkin of Iowa sponsored this amendment.

The House of Representatives had earlier endorsed the department’s proposal. But in another blow, the House on Oct. 2 voted to instruct House-Senate conferees debating the bill to block the changes. Although the House vote is non-binding, it allows representatives appointed to the Conference Committee to agree to the inclusion of the Harkin Amendment in the final version of the spending bill to be submitted to President Bush. The president has indicated that he will veto the bill if it contains the Harkin amendment, which would prevent the revisions from becoming effective.

Does that mean the changes will never make it into law? Not necessarily.

The Harkin amendment only prohibits the Department of Labor from spending money on changes that take away overtime from workers. If Bush does not veto the appropriations bill and the department wants to implement some of the changes, it may — as long as the changes do not negatively impact workers’ rights to overtime compensation.

For example, the proposed changes to the salary test would eliminate the “short and long” test and instead apply only the standard test. Under that test, the new weekly pay minimum is $425 or $22,100 per year before any white-collar exemption to overtime will be available. According to the Department of Labor, this salary requirement change guarantees overtime pay for 1.3 million people who now qualify as exempt employees not entitled to overtime.

Further, the amendments relating to disciplinary deductions from employee paychecks that would allow for single-day suspensions and the “window of correction” provision that would save the exempt classification for employees who suffer isolated or inadvertent deductions would not take away overtime from otherwise exempt workers.

Although the revisions to the salary test, disciplinary deductions and window of correction provisions were seen as important to employers, they were not at the heart of the amendments and the changes that many employers had hoped for. It is expected that many employer groups will continue to lobby to obtain more meaningful and concise regulations for the white-collar exemptions.

Opponents of the revisions agree that changes are long overdue, but disagree on the form those new rules should take.

Regardless of the president’s actions, this issue is sure to be debated for years. For now, the future of the proposed changes remains unclear. It is likely, however, that employers will have to continue to navigate the confusing maze of 70-year-old regulations and sometimes perplexing court interpretations.