Commentary | Wages, Incomes, and Wealth

Fair Pay Facts: The Department of Labor’s Misrepresentations About Its Overtime Rule


Opinion pieces and speeches by EPI staff and associates.


Fair Pay Fact

The Department of Labor’s Misrepresentations About Its Overtime Rule

By  Ross Eisenbrey

The Department of Labor has published a document that challenges EPI’s May 4, 2004 Senate testimony about the DOL final overtime rule as “false and misleading.”  In fact, every claim DOL makes in its new document is false.

DOL Misrepresentation #1:  The Department of Labor claims that its final rule guarantees overtime pay for police sergeants and generally strengthens overtime protection for police. 

Facts: Neither of DOL’s claims is true.  Wage and Hour Administrator Tammy McCutchen, admitted, in testimony before the Senate Appropriations Subcommittee on Labor, HHS, and Education on May 4, 2004, that there is no guarantee under the final rule that a police sergeant will be entitled to overtime.  As always, overtime rights depend on the primary duty of the sergeant, which could be executive or administrative.  This is precisely what we said in EPI’s Senate testimony.  The final rule makes it easier to find that an officer’s primary duty is exempt, because it replaces the 50% rule of thumb with a rule that permits an employee to spend 90% or more of his time doing non-exempt, routine, manual, or repetitive work and still have a primary duty that is executive or administrative.  Therefore, it will be easier, not harder to find police employees (and other employees) exempt and to deny them overtime pay.

DOL Misrepresentation #2:  The Department of Labor denies that team leaders will lose overtime protection and claims that their right to overtime pay is strengthened.

Facts: There is no exemption for team leaders in the current regulations, and not one single case has ever held that team leaders who are not supervisors are exempt from overtime pay protection.  The final rule creates such an exemption for the first time and specifies that even team leaders with no supervisory responsibility can be denied overtime pay.  Productivity teams – one of the specific examples of a “major assignment” that would lead to exemption of the team leader — are widespread in American industry, and more than two million team leaders could lose their overtime rights if the final rule takes effect.  Because team leadership is deemed by 541.203(c) to meet the administrative duties requirements, including that the primary duty be directly related to management, even blue collar team leaders will be exempt under the final rule.

DOL Misrepresentation #3:    The Department of Labor claims that doing away with all limits on the amount of non-exempt work an employee can do while still being held exempt as an executive or administrator strengthens overtime protections.

Facts: The final rule throws out the 50% rule of thumb in current law that helps determine the employee’s primary duty by applying a common sense test: what you spend most of your time doing is probably your primary duty.  The final rule is one-sided and anti-overtime pay.  “Employees who spend more than 50% of their time performing exempt work will generally satisfy the primary duty requirement.”  541.700(b)  The converse, however, is not true.  There is no parallel presumption in the final rule that spending most of one’s time doing routine, manual, repetitive non-exempt work makes one’s primary duty non-exempt.

The final rule also eliminates the current law’s “tolerance levels” — strict limits on the amount of non-exempt work an exempt employee can perform in any week.  Under the current regulations an employee is exempt “Who does not devote more than 20 percent, or, in the case of an employee of a retail or service establishment who does not devote as much as 40 percent, of his hours worked in the workweek to activities which are not directly and closely related to the performance of [exempt] work.”  If the Department had retained the income thresholds in the current law and raised them to keep pace with inflation, the tolerance levels would apply to any employee earning less than $45, 000 a year.

Instead of retaining these protections, the Department eliminated them and gave employers a green light to exempt hundreds of thousands, if not millions, of low-level supervisors who spend the vast majority of their time doing manual labor, repetitive, routine tasks and ordinary production work.

DOL Misrepresentation #4:  “The final rules make no change to current law regarding financial services employees.”

Facts:  The final rule singles out only one industry under the administrative exemption: the financial services industry.  There is no remotely similar provision in the current regulations, and no such provision in the interpretive guidelines.  New 541.203(b) provides:

Employees in the financial services industry generally meet the duties requirements for the administrative exemption if their duties include work such as collecting and analyzing information regarding the customer’s income, assets, investments or debts; determining which financial products best meet the customer’s needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer’s products.  However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption.

The most extraordinary aspect of this unprecedented new exemption is that it simply deems employees to have met all the duties requirements – that their primary duty is work “directly related to the management or general business operations of the employer or the employer’s customers” and  includes “the exercise of discretion and independent judgment with respect to matters of significance” – regardless of the actual nature of the individual’s work.  In other words, the final rule exempts financial services industry workers simply for spending part of their day talking to customers about their credit-worthiness or describing the various products the bank or financial institution provides.

This is not just a change in the law; it’s a significant, unjustifiable weakening of the rights of millions of workers.  This change is special interest regulation at its worst.

DOL Misrepresentation #5: The Department denies creating a new exemption for funeral directors.

Facts:   For many years, Congress has considered legislation (H.R. 4540, 105th Congress; H.R.793, 106th Congress; H.R. 546, 107th Congress; S. 292, 108th Congress) to create an overtime pay exemption for funeral directors, but has declined to do so.  Nowhere in the current regulations is there any exemption for funeral directors.  The Department admits in the preamble to the final rule that its position has always been “that licensed funeral directors and embalmers are not exempt learned professionals.”

Yet now, for the first time, the regulations will provide that funeral directors are exempt as “le
arned professionals.”  There are 11 federal judicial circuits, and courts in only two of them have disagreed with the Department’s longstanding position that these employees, who in many respects are closer to tradesmen or cosmetologists than they are to lawyers or doctors, are not learned professionals.  As the Department admits, funeral directors do not meet the basic test of the exemption: their primary duty is not “work requiring knowledge of an advance type in a field of science or learning customarily acquired by a prolonged course of specialized instruction and study.”  Entry into the field does not customarily require a four-year degree, and much of the employees’ knowledge is gained through apprenticeship.  As the Department of Labor’s Occupational Outlook Handbook explains:

Apprenticeships must be completed under the direction of an experienced and licensed funeral director. Depending on State regulations, apprenticeships last from 1 to 3 years and may be served before, during, or after mortuary school. Apprenticeships provide practical experience in all facets of the funeral service, from embalming to transporting remains.

The preamble to the final rule reveals that only 16 states require licensed funeral directors and embalmers to have  as much as four years of college and ‘mortuary science’ study combined.  The Department of Labor was wrong to circumvent Congress and create this new exemption for funeral directors, who do not meet the current law’s criteria for the learned professional exemption.

Ross Eisenbrey is Vice President and Policy Director at the Economic Policy Institute in Washington, D.C.



See related work on Income and wages | Wages, Incomes, and Wealth

See more work by Ross Eisenbrey