Proposed US overtime rules come under fire

By Tim Fawcett
BBC News Online business reporter

US government plans to help more people earn extra cash from working overtime has run into trouble after critics said it would make life worse, not better, for thousands of American workers.

Bush is under fire over the proposed overtime rights rules

The spat has highlighted how labour rights could become an important issue ahead of the US Presidential election.

The Bush administration's "Fairpay" initiative aims to bring overtime rules up to date by including workers who are doing jobs that were left out in the past.

The Labor Department insists the new rules would strengthen overtime rights for 6.7 million American workers, including low-wage workers who were denied overtime under the old rules.

But critics insist it does not go far enough and say a huge number of workers would not qualify for overtime rates under the plan.

If the disagreements continue the rules may never get approved at all, leaving overtime pay unprotected for millions of Americans.

High earners

The new rules, due to come into effect on 23 August, aim to guarantee overtime protection for workers who earn less than $23,660, (£13,300) per year - that is $455 per week.

6.7 million Americans could benefit from the new rules

The idea looks simple enough, but problems arise not just for those earning less than $23,660 per year, but for those earning more as well.

"They harm a huge number of people making between $23,000 and $100,000," said Republican George Miller from California.

"It's riddled with loopholes, potentially making millions of Americans earning as little as $23,660 vulnerable to losing [some of] their income," said Senator Tom Harkin from Iowa.

Managerial jobs

The original overtime law guaranteed time-and-a-half pay for each additional hour worked beyond 40 in a week.

But not everyone was covered by the law - the act exempted certain grades and professions.

Administrative, executive and professionals were exempted based on duty tests.

That loophole would not be closed by the proposed new rules.

Hence, an "employee who leads a team of other employees assigned to complete major projects for the employer" could be exempted from overtime.

As many as 1.5 million Americans could be denied guaranteed overtime payment by that clause alone, said one expert in a memo.

Inadequate

Under pressure to extend the scope of the plan, the Bush administration has kept on adding to the list of occupations that should be covered by the rules.

Labor Secretary Elaine Chao says she faces a misinformation campaign

Following the proposed amendments, the list now includes a wide range of jobs, from computer programmers to plumbers.

And yet, a recent 52-47 Senate vote against the amendments means implementing the initiative will now have to wait.

Those who voted against said the revisions would have limited impact, were inadequate and confusing.

Stand-off

Generally, the rules are backed by business but denounced by the unions.

"It speaks volumes about the real motives of this so-called family-friendly administration," said Mark Wilson, a lawyer for the union Communications Workers of America.

But the US Chamber of Commerce, which represents more than three million businesses, backs the proposed new regulations.

"Although we are disappointed in some of the provisions, these reforms provide clearer guidance to both employers and workers on their rights and responsibilities under wage and labour laws," said Randel Johnson, Chamber of Commerce vice president for labour, immigration and employee benefits.

Business leaders welcome the idea to give wider overtime protection, as they had been complaining that they were facing costly lawsuits from employees who claimed they were being unfairly denied overtime.

The Administrative Office of the US Courts said class action litigation on wage and hour laws has grown by 230% since 1997 alone.

Employers

Opponents are interpreting some of the Labor Department's recommendations to employers as tips on how to avoid paying overtime to would-be newly eligible low-income earners.

In the Labor Department summary it says "most employers affected by the proposed rule would be expected to choose the most cost-effective compensation adjustment method".

It offers an options list, including adhering to a 40-hour week and adjusting an hourly rate to include overtime without increasing annual salary.

Taken literally, this would mean employees working more hours for the same pay.

In its defence "we do not anticipate employers will cut people's pay," the Labor Department said.

Mobilising force

The proposed overhaul of the overtime regulations would be the first major change since 1938.

US competitiveness is one element in a complex picture of workers' rights

But the revisions are looking less likely to happen.

In March, when the new regulations were proposed, the Democrats jumped on it as a means to gain political advantage, the Bush administration insists..

The administration has accused the Democrats of wildly exaggerating how many workers could lose their overtime pay.

The apparent deadlock means the rules will not be implemented until after the election at the earliest, and they would be dead in the water if President Bush is not re-elected.