This morning, the Department of Labor released new regulations governing overtime pay that will make it easier for employers to figure out which employees must receive it. While the full impact of the regulations has yet to be determined, they appear to provide several much-needed updates and clarifications to exemptions from the Fair Labor Standards Act. These improvements will limit costly lawsuits and should make it easier for businesses to expand their payrolls.
The Fair Labor Standards Act (FLSA) establishes a standard workweek of forty hours and requires that employees who work more than that in a given week receive one-and-a-half times their regular pay ("time-and-a-half") for the extra hours. There are exceptions to this rule, though, such as the "white-collar" exemptions for executive, professional, and administrative employees.
Determining which workers qualify under these exceptions is the responsibility of the Department of Labor (DOL), but DOL has made only minor changes to its rules since 1954. In 1954, computers had vacuum tubes and industrial robots were far in the future. Much has changed in the workplace since then, and the FLSA became increasingly outdated.
The old overtime rules left employers in a bind. Which employees
were exempt was not always clear, and court rulings on overtime
have been inconsistent difficult to predict. For instance, one
appeals court found that assistant managers at fast-food
restaurants were white-collar workers, even though they spent half
of their time preparing food. However, a federal court in
Texas concluded that engineers and scientists who ran
simulations of missions for the space program and critiqued the
performance of astronauts and mission control specialists did not
qualify as white-collar employees and were entitled to overtime
pay. In this environment, predatory lawyering has thrived;
class-action judgments on the FLSA have reached as high as $90
The regulations that were released today do not represent a major shift in policy; workers in occupations that customarily receive overtime pay are not likely to lose it. But the new regulations do provide clarity to the numerous grey areas that have developed over the last fifty years.
Clearer rules will allow both employees and employers to be more certain about their workplace rights, preventing conflicts that lead to expensive lawsuits. That there is now less legal uncertainty regarding overtime-due to the replacement of outdated and unclear regulations-should make employers more willing to hire. While many details still have to be explored and worked out in the workplace, the new regulations have the potential to provide a significant benefit to the nation's economy.
Paul Kersey is Bradley Visiting Fellow in Labor Policy at The Heritage Foundation.