One of the most important stories lost in the last-minute rush
to pass a budget last month was what Congress did not do: In spite
of constant pressure from organized labor, Congress did not
overturn new overtime regulations that took effect last August.
Various proposals to block the new rules, which cover the so-called
white-collar exemptions from the Fair Labor Standards Act (FLSA),
had been proposed, and some had secured the approval of the House
or the Senate; but the two houses of Congress were never able to
get this to the President's desk, and with completion of the budget
for the 2005 fiscal year and the impending arrival of a more
conservative Congress, labor's best chance to stop the new rules
has probably passed.
This means that the new overtime rules remain in effect. Just as
important, the Administration has demonstrated that a Republican
Administration can tackle substantive labor law reform and live to
tell about it.
As for the union movement, one thing it needs to ponder is not
just why it lost, but why it chose to resist these regulations in
the first place. For example:
- The rules had
been in desperate need of an update. The FLSA sets the minimum
wage, establishes a standard 40-hour workweek, and provides that
workers must receive time-and-a-half pay for overtime. Executives,
administrators, and professional employees are exempted, however,
from the FLSA and are not entitled to overtime pay. The regulations
that defined who qualified under these "white-collar" exemptions
had not been significantly changed since the mid-fifties and had
not been revised at all since 1975. As a consequence, the rules
were severely out-of-date, and many employees could not be certain
whether they were or were not exempted. Expensive class-action
lawsuits focused on overtime pay and the white-collar exemptions
were becoming increasingly common.
Administration's final rules were far from radical. Generally,
the new rules followed all precedents set by the older rules,
adding some details and accounting for new industries and
occupations. New minimum salary requirements mean that 1.3
million workers will gain overtime pay. Clearer rules mean both
easier enforcement of overtime pay and less risk that workers will
be denied overtime pay because of confusion.
Nonetheless, the labor union movement vehemently opposed the new
overtime rules. The AFL-CIO alleged that they would "hurt many
workers, taking much-needed extra cash out of their pockets during
an economic crunch and discouraging companies to create new jobs."
Union lobbying was nonstop, and Democratic lawmakers attempted to
insert amendments blocking the new rules into a wide range of
bills. Overtime became an issue in the presidential campaign, and
even after the election was settled, union supporters in Congress
made a last-ditch effort to thwart the new rules in the federal
The Administration and Department of Labor Staff deserve credit
for seeing a politically difficult task through to completion. The
President threatened to veto any legislation that would have
blocked the new overtime rules, and that threat was ultimately
enough to protect them from defeat. The Administration's
determination should improve working conditions throughout the
country and make it easier for employers to assign work and create
A poorly chosen battle could cost the labor movement clout and
credibility. Union opposition was based on a series of poorly done
studies that projected that millions of workers would lose overtime
protection under the new rules. But the predicted widespread loss
of overtime pay has yet to occur, and most likely never will.
Press reports since the new rules took effect indicate that,
when companies have applied the new rules, they have found either
no change or that more workers would be entitled to overtime pay.
One striking example is Frank's Nursery and Crafts, a
Michigan-based retailer of lawn care and gardening supplies. Before
filing for bankruptcy in September 2004, Frank's had performed a
review of its employees' overtime eligibility under the new rules.
If there ever was an employer that would want to take back overtime
pay in order to cut costs, it would be one that was staring
bankruptcy and likely liquidation in the face, yet Frank's found
that none of its employees lost overtime protection under the new
The AFL-CIO is considering sweeping changes to stem its long
decline in membership and influence. The union movement represented
nearly a quarter of American wage earners in 1973, but now only
12.9 percent are union members, and only 8.2 percent of workers in
the private sector are union members. Challengers to current
ALF-CIO President John Sweeney are proposing the consolidation of
smaller unions, new regional councils, and other changes that could
give the labor federation more political muscle.
Among the issues the union movement should consider is not only
its current strength, but also how that strength is used. As
leaders of America's union movement ponder radical restructuring to
reverse decades of decline, maybe one area they should look at is a
political and lobbying operation that so stridently opposed a
relatively benign labor law reform.
Paul Kersey is
Bradley Visiting Fellow in Labor Policy at The Heritage