Labor Dept. offers ideas on skirting OT payments to low-income workers

NEW OVERTIME REGULATION EXPECTED IN MARCH

WASHINGTON – A proposed Labor Department rule suggests ways employers can avoid paying overtime to some of the 1.3 million low-income workers who would become eligible this year.

By Leigh Strope
Associated Press

http://www.mercurynews.com/mld/mercurynews/business/7643095.htm

The department’s advice comes even as it touts the $895 million in increased wages that it says those workers would be guaranteed from the reforms.

Among the options for employers: Cut workers’ hourly wages and add the overtime to equal the original pay, or raise pay to the new $22,100 annual threshold, making them ineligible.

The department says it is merely listing well-known choices available to employers, even under current law.

“We’re not saying anybody should do any of this,” Labor Department spokesman Ed Frank said.

New overtime regulations were proposed in March after employers complained they were being saddled with costly lawsuits filed by workers who claimed they were unfairly being denied overtime. But the regulations themselves have stirred controversy over how many workers would be stripped of their right to overtime pay.

Rule expected in March

A final rule, revising the 1938 Fair Labor Standards Act, is expected to be issued in March. The act defines the types of jobs that qualify workers for time-and-a-half pay if they work more than 40 hours a week.

The proposed federal update probably will not have much impact on companies in California, since California’s rules offer most workers more overtime protection than both current and proposed federal regulations. Although the details differ, California businesses can follow similar strategies to avoid paying overtime.

Overtime pay for the 1.3 million low-income workers has been a selling tool for the Bush administration in trying to ease concerns in Congress about millions of higher-paid workers becoming ineligible.

But the Labor Department suggests how employers can avoid paying overtime to those newly eligible low-income workers.

Employers’ options include:

• Adhering to a 40-hour work week.

• Raising workers’ pay to a new $22,100 annual threshold, making them ineligible for overtime pay.

If employers raise a worker’s pay “it means they’re getting a raise — that’s not a way around overtime,” Frank said. The current threshold is $8,060 a year.

• Making a “payroll adjustment” that results “in virtually no, or only a minimal increase in labor costs,” the department said. Workers’ annual pay would be converted to a lower hourly rate that, with overtime, would equal the former salary.

`Payroll adjustment’

The department does not view the “payroll adjustment” option as a pay cut. Rather, it allows the employer to “maintain the pay at the current level” with the new overtime requirements, said the Labor Department’s Wage and Hour Division administrator, Tammy McCutchen, an architect of the plan.

Labor unions criticized the employer options.

Mark Wilson, a lawyer for the Communications Workers of America who specializes in overtime issues, said the Bush administration was protecting the interests of employers at the expense of workers.

“This plan speaks volumes about the real motives of this so-called family-friendly administration,” Wilson said.