Laboring for Overtime

COMMENTARY Jobs and Labor

Laboring for Overtime

Jul 31st, 2003 2 min read
Edwin J. Feulner, Ph.D.


Edwin J. Feulner is the founder and president of The Heritage Foundation.

When she left The Heritage Foundation more than two years ago, I felt certain Elaine Chao was heading off to one of the loneliest jobs in the country: Labor Secretary for a Republican president.


During her tenure, the Bush administration has reached out to labor leaders, but it's a tough sell. Despite her overtures, the big unions remain staunch supporters of more liberal candidates, as they have been for decades.


But that hasn't stopped Chao from trying to make life better for low-income laborers. For example, the Labor Department is trying to update the laws governing overtime -- laws first written during the Great Depression. Clearly, the job market has changed since then. When's the last time you saw a classified ad seeking a "leg man" or "straw boss," terms that remain in the current law?


Unfortunately, labor laws haven't kept up. Today, companies can classify employees who make just $8,061 per year as "exempt," meaning they would be ineligible for overtime. Chao has proposed raising that threshold to $22,000, a step that would immediately make an additional 1.2 million workers eligible for time-and-a-half.


While that change would help the poorest laborers, it wouldn't hurt most blue-collar workers. Union members who work under collective bargaining agreements would make at least as much under the new proposal as they do today. This includes most firefighters, nurses and police officers.


Who's leading the opposition to the changes? Another group that traditionally lines up behind liberals: Trial lawyers.


Because current law is so confusing, many companies struggle to determine which jobs are eligible for overtime, and which are not. Trial lawyers exploit this confusion: They pore over work roles until they find groups that seem mislabeled, and then file class-action lawsuits.


It's a booming business. In 2001 there were more suits filed over overtime pay than suits alleging discrimination in the workplace. And why not? If a lawyer can convince a court to agree that a company has made a mistake, he can force that company to shell out millions of dollars in back pay.


For example, two years ago, the Farmers Insurance Exchange of California was slapped with a $90 million judgment because it hadn't been paying overtime to its claims adjusters. More recently, Radio Shack and Starbucks surrendered without a fight. Those companies coughed up $30 million and $18 million, respectively, to settle out of court with store managers.


Under Chao's changes, those white-collar workers who make more than $65,000 would lose their right to overtime under the new laws. But keep in mind the original reason for such laws: To benefit poor laborers. Middle-class managers and professionals were never supposed to be covered.


Besides, these laws might well make life better for many in the middle class. The new regulations would allow companies to create a modern work force with more, better-paying white-collar positions. They also would allow companies to create more flexible work schedules. That means many of the new executives, who are now mostly hourly workers punching in at nine and punching out at five, would be able to spend more time with their families. As long as they remained productive, they could do their work any time they chose.


Trial lawyers and union leaders have never been eligible for overtime. Sadly, they are working hard to make sure that our poorest employees aren't, either.


Elaine Chao probably does feel lonely sometimes. But if she can succeed in her attempt to reform our outdated labor laws, it will all be worth it. She'll have earned the gratitude of millions of working Americans.


Ed Feulner is the president of The Heritage Foundation.