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U.S. Congress Narrowly Fails to Block Rule Changes for "White Collar" Workers, But Clarification and Simplification of DOL Rule Needed
(July 2003)

By Joni Fritz, Labor Standards Specialist

In March, the U.S. Department of Labor published proposed rule changes designed to clarify circumstances under which executive, administrative, and professional employees, outside sales people and computer professionals will continue to be considered exempt from overtime requirements. At the same time, the long outdated salary test was proposed to be increased from $155 per week for most exempt personnel, and $170 per week for exempt professionals, to $425 per week for all categories of exemption. The proposals have been quite controversial. Before midnight on June 30, the date comments were due, the Labor Department had received an estimated 79,000 statements from the public. All must be read and carefully analyzed before final rule changes can be published. These may differ in some respects from those proposed.

House considers effort to block rule changes

On July 10, the U.S. House of Representatives voted 213 to 210 to let work on the proposed changes continue. Union leaders and most Democrats opposed the changes, saying that they fear the salary increase would permit employers to discontinue overtime payments to employees earning $425 per week or more. On the other hand, employers and House Republicans join the Bush Administration in believing that the proposals will strengthen the rules, making it more difficult to exempt people who do not meet the duties tests that were published along with the increased salary requirement.

The newly proposed tests will be applied more liberally, however, to employees who earn $65,000 or more per year. It is possible that this latter amount is the sticking point for opponents of the proposed rule changes. In the field of human services, this is scarcely an issue; however, where few if any non-exempt employees already earn such high wages.

The House vote came on an amendment to the Labor, Education and Health appropriations bill. It generated intense lobbying, and even a White House threat to veto the spending bill if it included this amendment. Senate Democrats had planned to introduce a similar amendment, but it is unlikely that this will occur.

ANCOR member frustrations

ANCOR members often struggle to understand when employees meet the duties tests for the exempt categories. In recent years, Labor Department investigators have increasingly declared that many workers who are paid salaries as exempt personnel do not meet the Department's requirements. As a result, employers are required to pay overtime for the prior two-year period for workweeks in which those employees who were inappropriately treated as exempt worked more than 40 hours. It is often difficult to determine with any certainty when this occurred, with employees generally estimating that they worked longer hours than the employer realized.

Questions that arise in this writer's wage and hour workshops focus more and more frequently on the exemptions. LINKS carried a series of articles in 2002 which attempted to describe Labor Department requirements more clearly to readers. Perhaps the greatest surprise to providers is that the Department has made a blanket statement that case managers are not exempt. ANCOR submitted comments asking the Wage and Hour Division to review this decision and to treat most case managers as exempt employees under a combined administrative/professional exemption. The ANCOR position will be described in greater detail in a following issue of LINKS.

ANCOR published an article in the May LINKS discussing the proposed white collar rule changes, and has a more lengthy analysis on its web site. Only one member commented negatively about the proposed increase in weekly salaries. Many others stated that they already pay exempt employees higher salaries so this is not an issue for them. In contrast, they welcome the Department's effort and hope that language in the final rule will make it clear when employees will be considered exempt. Uncertainty over when the current rules are appropriately applied creates broad frustration.

Impact of proposed changes debated

ANCOR does not understand those who oppose the proposed rules who say that they would give employers greater flexibility to reassign middle-income workers to managerial and supervisory roles, "depriving them of overtime rights." In our reading of the proposed changes, the language seems to narrow rather than expand circumstances under which the exemptions can be applied.

The Economic Policy Institute has published estimates that as many as 8 million employees may lose overtime pay under the change. In contrast, the Department of Labor believes that as many as 1.3 million lower wage workers would no longer be considered exempt salaried employees if the rules are published as proposed.

If proposed salary levels rise from $155 and $170 per week to $425, employers will have a choice of increasing salaries to the new higher amount or converting the employees in question to hourly rather than salaried. There is no requirement that employees who meet the duties tests must be paid on a salary basis. In fact, some employers pay most employees hourly to avoid potential problems with Labor investigators.

Clarification and simplification of the rules for salaried exempt positions will be welcomed by most employers and employees alike. It is doubtful, however, that language can be developed which will make these rules totally objective. Some subjectivity is likely to continue. The hope is that it will be significantly reduced.

RESOURCE LINK For a thorough description of federal labor requirements applied to agencies that offer community supports and in-home services, you can obtain a copy of the newly released 2003 edition of the ANCOR Wage and Hour Handbook. This publication of 121 pages includes revisions of many sections, with some general reorganization and simplification of material. Some additional copies of U.S. Department of Labor opinion letters are also included. The newly revised Handbook is available to ANCOR members for $50 per copy, $65 for non-members. To order a copy, send a check or money order in the appropriate amount to ANCOR 1101 King Street, Suite 380, Alexandria, VA 22314; phone 703-535-7850.

AUTHOR LINK For further information, author Joni Fritz can be reached from mid-May through October at her home office in Colorado, phone 970-586-5804. In mid-November she will be returning to her home in Arizona, phone 928-203-0618. Her guidance is free to ANCOR members and to those who attend a Wage and Hour Workshop or participate in a teleconference. Consultation is available to non-members at a cost of $65 for up to one-half hour.

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