On May 20, the House Small Business Subcommittee on Workforce, Empowerment, and Government Programs held a hearing to examine the Department of Labor’s rule on overtime pay and its impact on small business. The department first published its proposed rule in March 2003. After receiving more than 75,000 comments, the department published the final rule on April 23, 2004. The rule will go into effect 120 days from the date of publication.
Under the final rule, full-time workers who earn up to $23,660 per year would be eligible for overtime pay. The Department of Labor estimates that an additional 1.3 million white-collar workers will be eligible for overtime pay.
Chair Todd Akin (R-MO) said that Congress “must continue to make it easier to do business in America in order to facilitate stronger and longer-term growth. These revised overtime regulations do just that by cutting bureaucratic red tape and reducing the need for costly litigation.”
Ranking Member Todd Udall (D-NM) disagreed. “We already know that the new regulations aren’t good for workers,” he stated, adding, “Now it’s becoming clear that what small businesses save in labor costs might cost them even more in legal costs. Small businesses don’t have the same resources as corporations that can more easily interpret these 500 pages of legalese.”
Alfred Robinson, Deputy Administrator of the Wage and Hour Division at the Department of Labor, appeared before the subcommittee to discuss the final rule. “Overtime pay is important to American workers and their families, and this updated rule represents a great benefit to them,” he stated. Mr. Robinson explained that workers earning less than $23,660 per year will be guaranteed overtime pay: “This will strengthen overtime rights for 6.7 million American workers, including 1.3 million low-wage, salaried ‘white collar’ workers who were not entitled to overtime pay under the old regulations, and who will gain up to $375 million in additional earnings every year.”
In responding to public comments regarding the rule, Mr. Robinson said that the new rule strengthens overtime protections for “licensed practical nurses, police officers, fire fighters, paramedics, and similar public safety employees.” Additionally, “The Department has updated the rule to clarify that ‘blue-collar’ workers — such as construction workers, cashiers, manual laborers, employees on a factory line or workers compensated under a collective bargaining agreement, will not be affected by the new regulation,” he said.
Mr. Robinson said that the department carefully weighed the concerns expressed by small businesses, which “are disproportionately impacted by unclear overtime rules and the concomitant risk of costly litigation.” He stated, “The Department has published a final rule sensitive to the unique challenges of the small business environment and has planned an aggressive compliance assistance program to help small enterprises understand and comply with the new rule, including revising all pertinent compliance assistance materials for small entities’ use, and distributing printed versions of the materials for employers that do not have access to the Internet.” Mr. Robinson also noted that the department intends to work with the Small Business Administration to educate small business owners and employers.
Arguing that the Department of Labor’s final rule on overtime “will hurt millions of American workers,” Ross Eisenbrey of the Economic Policy Institute stated, “I believe the rule is so ambiguous and internally inconsistent that businesses will find themselves unable to understand or explain it, and workers will be much more likely to sue when employers take advantage of the rule to reclassify their employees and cut costs.” Mr. Eisenbrey addressed a number of “problem areas” in the new rule, including the 50 percent rule of thumb; the classification of blue-collar workers; and the status of highly compensated employees, financial services employees, and learned professionals. “This new ‘learned professional’ exemption allows employers to deny overtime pay to employees who do not have advanced degrees or college degrees, as long as they ‘have substantially the same knowledge level and perform substantially the same work as the degreed employees,’” he stated. Mr. Eisenbrey argued that the department could have provided “absolute clarity” for employers by making a four-year specialized college degree a prerequisite for the learned professional exemption.
