WASHINGTON -- Food retailers hailed the Labor Department's final, revised overtime regulations while organized labor denounced them even though the agency appears to have scaled back its plan amid a heated election-year debate over jobs.
Labor Secretary Elaine Chao said at a news conference last week the new regulations, which will take effect in just over three months, will add 1.3 million workers to the ranks of some 110 million now eligible for extra pay after working 40 hours, and will strengthen overtime protection for an additional 5.4 million workers who may or may not already receive overtime.
"The rules clearly spell out the duties workers must perform before an employer can claim he or she is not entitled to overtime," said Chao. "This will protect workers from unscrupulous employers who try get around the rules by conferring executive titles on low-level workers."
In a departure from Chao's original overtime proposal in March 2003, the Labor Department increased the salary threshold guaranteeing overtime from $22,100 to $23,660. Under the final rule, employees who earn under $23,660 are guaranteed overtime if they work more than 40 hours a week.
The "outdated" rules currently in place guaranteed overtime only for workers making less than $8,060.
"Food retailers and wholesalers today applaud the U.S. Department of Labor for working to modernize, clarify and simplify the rules governing who qualifies for overtime pay," said Tim Hammonds, president and chief executive officer of the Food Marketing Institute, Washington, in a statement. "These rules have been some of the most convoluted and ambiguous federal regulations on the books. They have led to tremendous confusion for both workers and employers in the food distribution industry," he said, adding that it has led to an increase in costly class-action lawsuits.
Under the final rules, employees who earn between $23,660 and $100,000 a year are not automatically guaranteed overtime and could be deemed exempt if they do not meet the revised eligibility standards tests.
Asked how many workers might lose their overtime rights in the $23,660-to-$100,000 salary range, Chao said "very few," but offered no numbers.
The Labor Department claimed Tuesday 107,000 white-collar workers making over $100,000 a year could potentially lose their overtime protection under the new rules, which is a sharp downward revision from its estimates in March 2003.
Under Chao's original proposal, the Labor Department said 644,000 white-collar workers could have lost overtime benefits.
Organized labor claims millions of workers will lose their right to overtime pay, and cited a study released by the Economic Policy Institute, a union-supported think tank, that asserts more than 8 million workers could lose overtime if the proposed changes are enacted.
Blue-collar workers, including those in the garment industry, as well as workers covered by union contracts and contract workers, would be unaffected by the changes and remain entitled to overtime pay.
The Labor Department claimed there would be additional costs to employers including up to $375 million in annual payroll and $739 million in one-time implementation costs.
But it also predicted a 25% reduction in penalties awarded in overtime lawsuits, which could save companies anywhere from a combined $250 million to $500 million a year. Taking other costs, such as plaintiff and defense costs, into account pushes the savings to companies to anywhere from $500 million to $1 billion a year, according to a senior labor official.
Despite challenges in Congress, even among moderate Republicans with organized labor constituencies, the revised rule is expected to go into effect.
However, presumptive Democratic candidate Sen. John Kerry, D-Mass., has vowed to immediately repeal any overtime changes if he is elected president.
