WASHINGTON – A proposal that would drastically revamp the nation's overtime pay rules (search) is confusing and won't curtail costly lawsuits against employers as the Bush administration hopes, a Republican senator said Tuesday.
The Labor Department's overtime plan is holding up passage of a major spending bill in Congress. Shortly before lawmakers were to take up the stalled bill again, Sen. Arlen Specter (search), R-Pa., chairman of the labor appropriations subcommittee, summoned Labor Secretary Elaine Chao to a hearing to explain why her department was pressing for the overtime changes.
Chao said the current rules are outdated and confusing, and haven't been updated in decades. Employers are being subjected to $2 billion in "needless litigation" annually because companies and their workers do not clearly understand their obligations and rights, she said. The Labor Department could not say how many of the lawsuits came from willful violations by employers.
"Our intent is not to take away overtime -- not at all," Chao said of the proposal. "Our purpose is to protect workers."
Specter said the proposal's new definitions of professional, executive and administrative employees are still ambiguous, and would face plenty of lawsuits. "I'd like to limit litigation ... but I don't think it does that," he said.
The plan, which is expected to be issued in final form by March 31 and does not require approval by Congress, has been embroiled in controversy because it would remove overtime protections for millions of higher-paid workers. But exactly how many people and what kinds of occupations would be affected are unclear.
The Labor Department (search) claims that just 644,000 white-collar workers would lose their overtime pay. But the proposal itself reads that an additional 1.5 million to 2.7 million "will be more readily identified as exempt."
A study by a liberal think tank, the Economic Policy Institute (search), found that as many as 8 million workers could lose their overtime pay protections. Economist Jared Bernstein testified that the Labor Department only counts workers who currently are paid overtime, while EPI includes all workers covered by the protections, even if they never work overtime. Labor Department officials countered that EPI's study is erroneous because it counts part-time workers.
Congress is particularly sensitive to overtime pay changes in an election year. Specter, who is seeking union support for his re-election bid, has fought for a measure that would prevent the department from issuing any final regulations that would cut overtime pay protections for workers.
After days of intense negotiations before Congress adjourned last year, the White House prevailed and stripped that provision from the spending bill. Democrats and some Republicans have vowed to block the bill, which provides $373 billion in new funds for the 2004 budget year, because it does not contain the overtime measure.
Specter said he and other key budget appropriators sought meetings with Chao late last year on the issue, but were rebuffed. Chao said she never received the messages.
Chao said the proposal would guarantee overtime pay protections for 1.3 million low-wage workers. She criticized an Associated Press report that said her department, in the published summary of its proposed rule, listed several ways that employers could avoid paying overtime to those low-wage workers. Chao said those suggestions were part of an economic analysis required by law.
Employers' options to reduce costs, as detailed by the Labor Department, include cutting the wages of the 1.3 million low-wage workers newly eligible for overtime, then adding the overtime to equal the original salary; or raising salaries to the new $22,100 annual threshold so they would be ineligible.