WASHINGTON — A Bush administration plan unveiled Thursday to overhaul federal rules governing who gets overtime pay is raising eyebrows among retailers because of the cost.

This story first appeared in the March 28, 2003 issue of WWD. Subscribe Today.

The Labor Department said its proposal would add 1.3 million to the ranks of some 110 million workers now eligible for extra pay after working 40 hours. The estimated annual cost to business: $870 million to $1.57 billion.

Deciding who qualifies for overtime has been a knotty issue between management and workers for years and has resulted in numerous legal challenges. The 54-year-old rules have complex tests for defining overtime-ineligible administrative and executive jobs and qualifying blue-collar production and clerical positions.

The Labor Department’s Wage & Hour administrator, Tammy D. McCutchen, called the proposal “balanced” and a much-needed update that reflects modern-day workplaces where the line has blurred between blue collar and white collar workers. Because the overtime rules will be fewer, they will also be easier to enforce, McCutchen told reporters.

“We need tough and clear rules to enforce,” said McCutchen, noting that workers in sectors like garment production, where overtime violations are numerous, would benefit from the plan.

Under the proposal, all workers making $22,100 or under would receive overtime if they work more than 40 hours. Workers covered by union contracts and contract workers would be unaffected by the changes. Now, the salary level triggering overtime is $8,060 or $13,000, depending on various job descriptions. The threshold was last increased in 1975.

Katherine Lugar, vice president of government relations at the National Retail Federation, said retailers should be enthused the proposal streamlines the job criteria for determining which workers making more than $22,100 a year would receive overtime.

However, Lugar said that overtime threshold might be too pricy for stores located in rural parts of the country where wage rates are lower than cities.

“We need to take a look at what kind of impact it would have on our industry,” Lugar said. “But I do want to endorse and applaud the Labor Department for taking this bold step in trying to reform a very complicated part of our labor laws.”

The proposal calls for replacing lengthy job-criteria tests for determining overtime with two to three tests. For example, a worker meeting the $22,100 threshold would be deemed ineligible for overtime if their duties were non-manual and held a “position of responsibility” defined as either performing work of substantial importance or performing work requiring a high level of skill or training.

Organized labor greeted the proposal, which is open for comment over the next 90 days, with skepticism. While union officials were generally pleased to learn the overtime salary threshold would be increased, they are concerned about workers losing overtime now paid more than the threshold.

Labor estimates the proposal could remove overtime eligibility for about 640,000 white collar professionals paid by the hour. An estimated 10.7 million workers now deemed to have an uncertain pay-rate status would have their status clarified.

“We certainly see the potential downside,” said Chris Chafe, political director with the apparel and textile union UNITE.

A spokesman for the United Food & Commercial Workers Union, which represents some department store workers, called the proposal “vague” in defining who doesn’t get overtime.

“They are looking at people who they can reclassify as professional,” the spokesman said.

Administrations since President Carter have looked at revamping the overtime rules, but until now proposals haven’t been made. Also in the works at Labor is a proposal revamping rules for when workers qualify for compensatory time.

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