| Management Crib Sheet |
12 January 2004
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Labor Department Advises Firms on Beating Overtime Requirements
Overtime pay for working more than 40 hours in a single week is one of the benefits organized labor has brought to its members, and indeed, the entire American economy. However, the US Labor Department appears in need of a name change to the Department of Management, since it has advised businesses on how to avoid paying overtime. So much for a neutral federal government.
According to an AP report, the Labor Department plans to issue a final rule revising the 1938 Fair Labor Standards Act in March. However, the Labor Department said, "Most employers affected by the proposed rule would be expected to choose the most cost-effective compensation adjustment method," which in some cases would have a "near zero" effect financially.
The department suggests increasing pay to $22,100, a new threshold that makes workers exempt from overtime pay. While a pay hike is appreciated by everyone, laying on additional hours could result in an hourly rate that is lower than before the pay increase. Alternatively, the department says annual workers' pay can be changed to hourly, cut and any over-time would merely return the new annual payment to the old level. The only honest way to avoid overtime that the department suggests is to adhere to the 40-hour work week.
In 1986, a memo from Ronald Reagan's Labor Department, supporting a 1945 Supreme Court decision, laid out that it is illegal to cut workers' wages to avoid overtime pay. In 2003, George W. Bush's Labor Department is arguing that weekly adjustments are illegal but a one-time cut is not. That is how far America has come; the Reagan administration was more pro-worker than this one.
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