As the nation celebrates Labor Day, it’s worth noting that we honor the nation’s workers amid one of the most important labor debates in decades. The U.S. Department of Labor is overhauling the Fair Labor Standards Act (FLSA), the law that governs overtime and other workplace issues. As the department begins updating its regulations, and Congress is poised to get involved in the issue, it is important to look at the facts.
The last time the FLSA was updated was 1954, when Elvis was in high school and ‘strawboss’ was a coveted job covered under the regulations. Many think they already have a good idea who should be legally entitled to overtime for working more than 40 hours in a week. The laborer on an assembly line clearly deserves this legal protection, but the well-paid corporate executive, doctor, or attorney probably does not.
But the workforce is much more complicated. Regulations have not kept pace with realities so what should be a simple test, determining an employee’s overtime eligibility, is in fact, a complex exam with little certainty. Even the most well-intentioned employer with expert legal counsel will frequently not know at the end of the day whether he or she has properly classified employees.
Just ask virtually any employer or manager, and they’ll tell you the overtime rules are at best guesswork and at worst dangerous to job creation. And class-action overtime lawsuits have become a frequent litigation against employers.
In December a court approved a $4.1 million settlement that included overtime payments to corporate lawyers, a former human resource director, and corporate vice presidents based on technical violations of the “salary basis” test. A court even ruled that a top NBC network producer earning in excess of $80,000 per year was entitled to overtime.
If the companies in these cases could not determine how to classify their employees, how then can the small business person be expected to interpret regulations that are so outdated they describe occupations as ‘gang leader’, ‘leg man’, ‘keypunch operator’, and ‘under-bookkeeper’?
Perhaps that is why reform of these regulations has been on the regulatory agenda of every president, Republican and Democrat, since the Carter Administration. Indeed, in 1999, the non-partisan General Accounting Office issued a report recommending that the Labor Department “comprehensively review the regulations for the white-collar regulations and make necessary changes to better meet the needs of both employers and employees in the modern work place.”
For some organized labor, this issue may have become a way to recruit ‘white collar’ workers into becoming supporters. Sadly, anyone using the issue for sheer political gain is ignoring the fact that low-wage workers, who would benefit from the revamping, are at the lower end of income and influence: 54.7 percent are women; 24.8 percent are Hispanic; 16.6 percent are African-American; and almost 70 percent have a high school education or less.
Organized labor and some members of Congress are leading an effort to prevent modernization of these regulations. They characterize the regulations as an attack on the American worker. While this sort of inflammatory rhetoric may be common in Washington, politicians should realize clearer and more modern regulations would help employers and employees alike.
While reasonable people can disagree over what the precise test should be for determining whether an employee is eligible for overtime, all should agree that the time for updating the regulations has long since passed. American workers would be better off if their employers could focus on growing their businesses rather than spending precious resources trying to apply outdated regulations in today’s workplace. The Labor Department deserves a chance to move forward with its regulatory process.