New OT rules bring confusion

WASHINGTON – Paychecks could surge or shrink for a few or for millions of workers across the country starting today, when sweeping changes to the nation’s overtime pay rules take effect.

Workers who earn less than $23,660 annually will become automatically eligible for overtime pay, a boost from the current threshold of $8,060, set in the 1970s. That change is “the most objective bright line standard” in the dense, complex regulations, said Tom Farmer, a senior consultant with Hewitt Associates, a human resources consulting firm. He predicts thousands of workers will begin earning overtime immediately because of the higher threshold.

There is little agreement by the Bush administration, employer groups, labor experts and others on how many workers will gain or lose the right to overtime pay under the new rules in the Fair Labor Standards Act.

“To be candid, no one knows,” said Jerry Hunter, a labor lawyer at Bryan Cave LLP in St. Louis and former general counsel of the National Labor Relations Board during the first Bush administration.

“There is just going to be continued confusion,” said Anita Raman, vice president of operations for Pro Unlimited Inc., which helps companies sort out employment regulations. “Employers really thought with the new law, ‘I’ll definitely be able to figure out who’s exempt and who isn’t.’ They are still wandering around trying to figure out how to classify (employees) correctly.”

Salaried workers who fall between $23,660 and $100,000 a year might lose overtime based on a duties test, which describes the tasks that determine whether a worker can, for example, be classified as a professional ineligible for overtime. Those making more than $100,000 will lose their overtime rights unless they do not regularly perform professional, administrative or executive duties.

“It’s really in that duties test that the really negative impact is being made,” said Baldwin Robertson, a lawyer who works with the AFL-CIO.

For example, Robertson said, workers in the food industry who spend most of their time doing manual work, but sometimes instruct subordinates, could be overtime losers under the new duties test. Those workers can be reclassified as team leaders or as executives because they lead teams, or supervise two or more people, Robertson said.

Employers have sought changes for decades, complaining the regulations were ambiguous and out of date, and questioning why highly paid professionals should get overtime pay. Labor unions, however, say the new rules are intended to reduce employers’ costs by cutting the number workers who are eligible for overtime pay.

Estimates of how many workers will lose their overtime eligibility range from 107,000 to 6 million. Workers who could become newly eligible range from very few to 1.3 million.

The new rules are intended to limit workers’ multimillion-dollar lawsuits, many of them successful, claiming they were cheated out of overtime pay for working more than 40 hours a week.

Labor Secretary Elaine Chao has created a task force that will be “looking very closely and critically at any reclassifications that result in workers losing their overtime status,” said Steven Law, deputy secretary.

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