August 19, 2004

August 19, 2004 | News Releases on Jobs, Jobs and Labor Policy

New Labor Regulations Benefit Managers and Workers, Analysts Say

WASHINGTON, AUG. 18, 2004 - Contrary to what we've heard on the news recently, the overtime and employee classification guidelines from the U.S. Department of Labor that take effect next Monday will make more workers eligible for overtime, make the salary tests for executives more realistic and make the laws clearer and easier to follow, according to two new papers from The Heritage Foundation.

One paper, by Heritage labor policy analyst Paul Kersey, describes the depth and breadth of the work that had to be done to reform the regulations. Until the reforms go through, white-collar workers who make as little as $155 per week, or $8,060 per year, can be considered "exempt" or ineligible for overtime pay.

The new regulations also update a wide range of rules that define what sort of work may be performed by exempt executives, administrators or professional employees. These new rules encompass 50 years of court rulings and DOL policy changes and will result in a few changes in terms of who is covered by the exemptions. Most importantly, the updated rules will make it easier for employers and employees to figure out who is exempted, preventing costly lawsuits over overtime eligibility. The net effect of the rule changes will be that more workers will be entitled to overtime pay.

Kirk Johnson, author of the paper on who benefits from the new round of changes to the Fair Labor Standards Act, says workers benefit from more likely being eligible for overtime and employers benefit from knowing exactly what the rules are and being able to easily enforce them.

Johnson says few workers who make between $23,660 and $100,000 per year would be adversely affected by the new regulations. As many as 300,000 workers-all of whom make $100,000 or more per year-could lose overtime protection because, under the new rules, they would be paid overtime only if management agrees.

Conversely, nearly 1.3 million low-income, white-collar workers will become eligible for overtime under the new rules, according to Johnson. Almost all of them gain eligibility thanks to the new salary rules, which raise the limit at which employees can be considered exempt from the $155 per week mentioned above to $455 per week.

The new Department of Labor regulation on who belongs to management and who doesn't will clarify the answer for many. It will replace the duties test, which led to much debate, as well as lawsuits, when, for instance, managers in grocery stores took time to stock shelves and so forth. The new test is simple: A manager oversees two or more employees and has some influence-their recommendations on personnel are "given particular weight"-into the hiring and firing of those employees.

"Our economy runs too fast to be bound by outdated regulations," says Kersey. "These new regulations not only seek to simplify and clarify, they actually make about 1 million more people eligible for overtime. This is long overdue."

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