September 6, 2004

September 6, 2004 | Commentary on Jobs, Jobs and Labor Policy

Don't Worry Over Overtime Changes

This Labor Day finds many workers in a state of anxiety over the overtime rules that became law on Aug. 23. The worry is understandable, but unnecessary. Contrary to reports from many self-described worker advocates, the new overtime regulations are unlikely to cost many employees their overtime pay.

Yet misperceptions abound. The day the new rules took effect, for example, Sen. Tom Harkin held a press conference outside of the Department of Labor's offices in Washington, D.C. Harkin passed along a story from the Aug. 11 Chicago Sun-Times reporting that, as a result of the new rules, 2,000 employees of Sears Roebuck and Co. had been reclassified and were no longer entitled to overtime pay.

But the Sun-Times story was wrong. In fact, the paper already had printed a correction (on the 13th) and announced that 2,000 employees of the department-store chain were about to begin receiving overtime pay under the new regulations. Oops.

Sen. Harkin and the newspaper both can be forgiven. So much confusion surrounds the new rules that it would be easy to assume that whenever jobs are "reclassified" in terms of overtime eligibility, it must mean workers are losing overtime pay, rather than gaining it.

But as the rules are applied in workplace after workplace, a pattern is developing: Employers initially intimidated by the 15 pages of carefully worded rules find that little has changed. And employees find that they and their co-workers are still entitled to time-and-a-half pay whenever they work more than 40 hours a week.

The misplaced concerns about the overtime rules can be traced to a report by the pro-union Economic Policy Institute, which estimated that six million workers would lose statutory overtime protection under the new rules. This report drew much attention before the new rules took effect, but since then nearly every employer who has applied the new rules has found either no changes, or found workers who gained overtime.

Among the many examples: A spokesman for Franks Nursery and Crafts, a retail chain based in Troy, Mich., noted in Crain's Detroit Business magazine that they were not affected. Blue Cross and Blue Shield of Kansas announced that none of their 1,850 workers would lose or gain overtime rights under the new rules.

Office Depot, headquartered in Delray Beach, Fla., announced that they expect no changes. Reimbursement Technologies, a medical billing company in Conshohocken, Pa., found that 40 of their employees would gain overtime and none would lose it, according to the Philadelphia Inquirer. And, of course, the 2,000 Sears Roebuck and Co. employees will be gaining, not losing, overtime pay.

Expect this trend to continue. There will be a few workers who lose a legal right to overtime pay (though new rules for those earning more than $100,000 annually will mean that highly paid workers are more likely to be considered exempt). Meanwhile the minimum salary needed to qualify for an exemption increased from $8,060 to $23,660, an increase that will result in 1.3 million workers gaining a legal right to time-and-a-half pay for overtime.

The new rules also add details and updates for new industries and occupations that have grown up over the last half-century. The last thorough review of these rules was 50 years ago, and many of their harshest critics admit that the overhaul was long overdue. But the new details that were added were frequently based on prior court cases or Department of Labor's own practices, meaning little was really changed. Up-to-date rules will mean that both employers and employees will find it easier to tell who gets overtime, reducing the risk that either will be forced into costly and time-consuming lawsuits.

Many workers will be worried about overtime this Labor Day, but over the next few months, as employers work through the new overtime rules, those worries should dissipate. The far greater concern for workers, one that should become more pressing as worries over overtime recede, is whether or not their interests are well served by organizations and politicians prone to overreact to a fair and long overdue revision of an important labor law.

Paul Kersey is a policy analyst who specializes in labor issues at The Heritage Foundation (, a Washington-based public policy research institute.

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Paul Kersey Visiting Fellow

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