EPI Journal

Overtime protection in jeopardy

Overtime protection in jeopardy

EPI leads opposition to proposed rule changes

On March 31, 2003, the Department of Labor (DOL) published a proposal to amend the overtime regulations under the Fair Labor Standards Act of 1938. The DOL’s press release that accompanied the proposal described it as a modernization of archaic rules that would extend overtime protection to 1.3 million low-wage workers, provide new clarity on overtime rules, and reduce litigation. The only downside for workers, according to the DOL, was the loss of overtime protection for 644,000 more highly paid white-collar employees.

On further examination, however, it became apparent that the Department of Labor was misleading the public. The proposal makes sweeping changes in the regulation designed to deny overtime pay to broad categories of workers. Far from clarifying the regulation, the proposal introduces new and highly ambiguous terms and removes most of the quantitative measures that limit the current exemptions.

The proposal denies overtime protection to workers who hold a “position of responsibility” or whose job requires a “high level of skill or training.” Other changes dilute the definition of an exempt professional in ways that will deny coverage to workers ranging from cooks and chefs to reporters, nurses, and dental hygienists. Workers who have never completed college, or even earned an associate’s degree, could become exempt as “learned professionals” or “creative professionals” and lose the right to receive overtime pay.

With the help of lawyers, former Department of Labor investigators, and human resource specialists, a team of EPI researchers analyzed the effects of the proposed rule and determined that the DOL not only grossly underestimated how many workers would lose overtime coverage, but also overestimated how many low-wage workers would be newly protected. We estimate that more than eight million workers will lose their right to overtime pay, more than 10 times as many workers as will benefit from the proposal’s increase in the income threshold below which workers are automatically covered.

We discovered that the DOL, either intentionally or through sloppy work, included approximately 600,000 blue-collar workers who are already entitled to overtime pay in its estimate of how many low-wage workers would gain coverage. The DOL also assumed that all of the remaining 700,000 salaried white-collar workers earning less than $22,100 a year are currently not eligible for overtime. In fact, the DOL never did a survey of these workers’ job duties and has no way of knowing whether any of those workers currently qualify for overtime protection. In all likelihood, in fact, very few workers making $15,000 a year (let alone $9,000 or $10,000) are bona fide executives, professionals, or administrators who are legitimately exempt under current law.

EPI’s analysis has helped provoke a nationwide outcry against the proposed rule and has had a tremendous impact on how Congress perceives FLSA changes. EPI researchers and policy analysts, including Jared Bernstein, Sarah Harding, and Ross Eisenbrey, have participated in dozens of television and radio interviews, spoken to scores of print journalists, and participated in several public debates on the merits of the proposed rule.

Bipartisan legislation was introduced in both the House and Senate to block the parts of the proposal that would deny coverage to workers who are currently protected. In July, the House narrowly defeated this attempt to block the proposal by a vote of 210-213. But in September, following several news conferences highlighting the EPI analysis and a Senate hearing at which EPI Vice President Ross Eisenbrey testified, the Senate voted 54-45 in favor of an amendment offered by Senator Tom Harkin to deny the Department of Labor any funds to issue a rule that would cause workers to lose overtime protection.

On Wednesday, October 1, the House approved a motion to instruct its negotiators to agree to the Harkin amendment, reversing its earlier position by a vote of 221-203. This vote would have ensured that any changes to the current FLSA regulations would not deny coverage to workers who currently receive overtime. However, despite the disapproval of both houses of Congress, the Bush Administration has announced its intention to proceed with the proposed rule. The president’s advisors have recommended that he veto the Labor, Health and Human Services, and Education appropriations bill if the Harkin amendment is retained.

The stakes in this legislative battle are enormous. U.S. workers are already among the most overworked and highly stressed in the industrialized world, working longer hours on average than workers in every European country as well as Japan. Workers covered by the Fair Labor Standards Act’s overtime protections are much less likely to work long hours than those who are exempt. Whereas only 20% of covered, nonexempt employees work more than 40 hours a week, 44% of exempt employees work overtime. And exempt workers who are ineligible for overtime protections are three times more likely to work at least 50 hours a week.

Eliminating overtime protection for an additional eight million workers will increase the stress on American families, decrease the hours parents have available for school activities with their children, reduce the time available for community activities, and reduce family incomes. Those employees who work regular overtime generally earn 20% or more of their weekly wage in overtime pay. The loss of that income will have dramatic effects on the standard of living of many workers and their families. It also stands to reason that the net impact on employment will be negative as the elimination of overtime pay makes it cheaper for employers to require that employees work longer hours than it would be to spread the work among additional employees. As the nation faces a prolonged jobs crisis and lagging consumer demand, the Department of Labor’s proposal to eliminate overtime pay for millions of workers is especially ill timed and destructive. 

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