NCPA - National Center for Policy Analysis

FORECASTERS MAY HAVE MISJUDGED OVERTIME OVERHAUL

April 21, 2005

More workers appear to have gained overtime protections than lost them as a result of the Bush administration's broad revision of the Fair Labor Standards Act's white-collar overtime rules, says Kris Haher (Wall Street Journal).

That should come as a surprise to many people who predicted the opposite would occur:

  • When the Labor Department rewrote overtime rules, it more clearly defined which workers are entitled to receive overtime pay and which ones aren't.
  • The new rules reclassified many higher-paid workers as professionals and managers, meaning they no longer automatically qualify to receive time-and-a-half pay for working longer than 40 hours a week.
  • Workers earning less than $23,660 and many white-collar office workers who previously were excluded from overtime are now entitled to receive it.

At the time, labor groups and some liberal economists said far more workers would be excluded from overtime than would gain it and that incomes for millions of workers would fall. The Economic Policy Institute in Washington estimated that as many as six million workers would lose overtime pay under the rules. Government officials said 1.3 million workers would gain overtime protection.

So far, it appears that many companies have paid out more overtime to more eligible workers since the new rules went into effect, according to executives and consultants, says Haher:

  • A February survey by Business & Legal Reports Inc. of 400 U.S. companies -- large and small and across industries -- also found that 40 percent of companies gave overtime protection to some workers who didn't have it before.
  • Only 13 percent of respondents eliminated overtime eligibility for workers; in each case, fewer than 50 people were reclassified one way or the other.

Source: Kris Haher, "Forecasters May Have Misjudged the Effect Of Overtime Overhaul," Wall Street Journal, April 18, 2005.

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