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Impact of overtime changes still a puzzle

American workers face "minimal" drawbacks from proposed changes to the nation's overtime rules, Labor Secretary Elaine Chao told a panel of lawmakers Tuesday. But the true impact remains a puzzle, as demonstrated Tuesday at a Senate hearing.
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American workers face "minimal" setbacks from proposed changes to the nation's overtime rules, Labor Secretary Elaine Chao told a panel of lawmakers Tuesday.

But the Senate hearing where she appeared -- meant to clarify the new regulations -- devolved into a battle of numbers, a sign that the impact of the intended rules is anything but clear.

Chao reiterated her department's estimates that 1.3 million low-wage U.S. workers not currently eligible for overtime would gain that right, while some 640,000 employees could lose eligibility. She attacked one estimate that 8 million workers could lose overtime rights, and said the larger estimate showed critics' "gross misunderstanding" of labor regulations.

"Our intent is not to take away overtime, not at all. Our intent is to strengthen overtime," she said. "We hope that the adverse impact would be minimal."

Those critics, including economist Jared Bernstein of the Economic Policy Institute, who authored the study that reached the 8 million figure, lashed back at Chao's figures. The institute, which is affiliated with labor unions, presented new analysis based on Labor Department data that the government's estimate of 644,000 hourly workers estimated to lose overtime rights was closer to 5 million, while some 2.1 million would be exempted from overtime because of changes to definitions of which jobs are overtime-eligible.

Bernstein said his analysis showed the government's estimate was far closer to his own, including the 2.1 million figure, which came from the government's own assessment of workers who could be "more readily identified" as exempt.

"We believe the Bush administration has grossly miscalculated the effects," AFL-CIO Secretary-Treasurer Richard Trumka said at the hearing.

Bernstein repeated an assessment from last fall that about half of the 1.3 million workers the Bush administration estimates could gain overtime already qualify for it. "They gain nothing new under the proposal," he said.

Chao stuck to original estimates provided last year by her department. At the same time, she said the Labor Department had uncovered several errors in Bernstein's initial numbers, though she did not detail them.

Senators seek answersTuesday's Senate Appropriations subcommittee hearing was called by Sen. Arlen Specter, R-Pa., to help clear up questions the overtime changes, which have been at the center of an ever nastier debate in recent months.

Specter, along with Sen. Tom Harkin, D-Iowa, sought to stall the regulations last fall amid concerns about their impact on white-collar workers, especially nurses and public safety employees. The Senate passed an amendment from Harkin to block funding for the new regulations, but the amendment, inside an $820 billion omnibus spending bill, was scuttled in conference committee last November.

The Senate failed Tuesday to vote on the spending bill. Democrats indicated they would delay its approval over several issues, including the overtime rules. Republican lawmakers vowed it would pass soon, perhaps by next week, and Senate Majority Leader Bill Frist said it would be approved in its current form.

The Labor Department proposed long-awaited changes to the overtime regulations last March, and received tens of thousands of comments. Her agency plans to submit a final rule by March 31.

The changes would be the first since the 1970s, and the biggest since overtime rights were secured in the years leading up to World War II. They would raise the salary cap for guaranteed overtime from just over $8,000 a year to $22,100, but would cap overtime rights for anyone earning over $65,000.

More complicated are changes in which jobs can qualify for overtime.  Workers assigned to administrative, managerial or professional duties are currently exempt from overtime protections; they are not guaranteed extra pay for extra hours, though employers may choose to pay them more.

The new rules would change many of the definitions for these workers. While supervisors are currently separated from "production" workers, the new language would exempt anyone in a "position of responsibility."  Exemptions based on educational requirements would be replaced by a category of "learned professional," and would allow on-the-job experience to substitute for time in school.

The Labor Department was assailed earlier this month for providing tips to employers on how to avoid paying overtime.

Lawsuit concernsBackers of the changes also hope to stem thousands of lawsuits from workers who believe they have been denied overtime -- at a cost, Chao said, of some $2 billion in legal bills each year.

But Specter, who has defied members of his own party by questioning the rules, told the labor secretary he was doubtful the new rules as proposed would stem the tide of lawsuits. After reviewing the new rules, he said, "It seemed to me that the ball was not advanced on limiting litigation."

Organizations challenging the rules believe the new definitions will lead to more confusion and years of new litigation. "Those are a lawyer's dream," Trumka said.

Andrew McDevitt, manager of government relations for the American Payroll Association, suggested the rules could be improved by listing specific job titles in addition to the broader definitions.  His group supports the new rules but wants additional clarity to help its payroll-employee members.

"Then they can classify their workers properly and everyone gets paid properly," he said.

It would also be helpful to require the Labor Department to conduct regular reviews of job titles and salary levels set forth in the rules, said McDevitt.

Such a solution could address another issue raised by organized labor: While the new proposed salary levels would provide some clarity, the rules make no provision for cost-of-living increases or inflation. The current salary level for guaranteed overtime, which falls well below the poverty level, was set in 1975 and been neither revised nor tied to wage growth.

Little clarity has emerged in the overtime debate since last spring, and, one economist noted at Tuesday's hearing, widely used figures haven't helped accurately frame the scope of the changes.

"There is an element in this analysis that is inherently subjective," said Ron Bird, chief economist for the employer-supported Employment Policy Foundation.

Growing frustrationAmong the issues in contention: whether to count only workers who currently earn overtime or all those who could qualify for overtime.

Business groups and the Labor Department have criticized the EPI study for counting all employees who could lose eligibility; EPI and others have taken the Labor Department to task for predictions based on the economic impact to businesses, not the potential impact on employees.

Unions have also focused in the past month on the "learned professional" provision, which could bar workers from overtime if they received advanced training during military service.

"This proposal was not only offensive," Trumka said Tuesday, "it actually insults the men and women who risk their lives to serve this country."

The American Nurses Association, which represents one group of workers said to be significantly impacted by the rules, also took issue Tuesday with the learned professional exemption, which they believe could do away with the pay they currently receive for the mandatory overtime many of them currently work.

"For nurses, it will mean longer hours with less pay and likely mandated hours," Patty Hefner, a registered nurse in Pennsylvania, told lawmakers.

Specter also sharply questioned the labor secretary about several unanswered requests he made last November to her office during conference negotiations.

The secretary said her agency was evaluating the many comments made in response to the proposed regulations, and Labor Department officials have said changes are likely. But Chao made no indication that final language would be made public or provided to lawmakers before it is published. Once finalized, the rules will be reviewed by the Office of Management and Budget.