Chao Says New FLSA Regulations Should Be Completed in March

-DOL expects to release new Fair Labor Standards Act (FLSA) regulations including changes to the so-called "white-collar" exemption rules by March 31.
Excerpted from the FLSA Employee Exemption Handbook, Thompson Publishing Group

U.S. Department of Labor (DOL) Secretary Elaine Chao told a Senate committee that DOL expects to release new Fair Labor Standards Act (FLSA) regulations - including changes to the so-called "white-collar" exemption rules - by March 31.

At a Capitol Hill hearing, Sen. Arlen Specter, R-Pa., asked Chao to delay release of the new rules until Sept. 30. But Chao responded that DOL is committed to adopting new regulations by March, because, she said, "any further delay would only harm workers . . . [and] enough time has been spent on delays and studies of all sorts."

Specter, chairman of the Senate Appropriations Subcommittee on Labor, Health and Human Services and Education, scheduled the hearing to address the highly controversial changes to the white-collar regulations. While it´s uncertain whether the final regulations will be substantially the same as last year´s proposals, they are expected to change the parameters for determining whether workers are exempt from the FLSA´s minimum wage and overtime pay requirements.

Under the federal wage and hour law, employees who are considered ´nonexempt´ must be paid time and one-half for every hour worked over 40 in a week.

At the hearing, Specter expressed his concern that DOL´s proposed changes to the rules will not help improve compliance with the law, which many say is outdated and in need of clarification. "It´s hard to see how there will be any significant improvements to the existing law," he said.

Professional Exemption

Specter said he was concerned that the proposed regulations are just as unclear as the current regulations, and therefore would not help reduce the growing amount of FLSA litigation.

He cited the professional exemption provision as an example. Currently, an exempt "learned professional" must primarily perform office or nonmanual work requiring advanced knowledge in a field of science or learning - knowledge that is customarily acquired through advanced academic credentials. Under DOL´s proposed rules, although an exempt learned professional would still be required to have a primary duty of performing work requiring advanced knowledge, the exemption would no longer be restricted to those with advanced academic credentials - on-the-job experience would also count.

Many groups are concerned that this change would allow employers that currently pay overtime wages to nonexempt workers to claim those workers as exempt - and no longer pay them overtime. Patricia Hefner, who spoke on behalf of the American Nurses Association, said the change could hurt the already understaffed nursing field by allowing employers to classify more nurses as exempt.

Sen. Larry Craig, R-Idaho, echoed Hefner´s concerns, asking Chao how many workers would be affected by DOL´s proposed changes to the education requirements for exempt professionals. Chao deferred the question to Wage and Hour Administrator Tammy McCutchen, who did not give specific numbers, but responded that DOL did not intend to broaden the number of exempt professionals. The issue will be addressed in the final regulations, she said.

Specter also questioned Chao about DOL´s progress on finalizing the proposed regulations. After the new regulations are approved by DOL´s senior policymakers, independent analysts must study their probable economic impact, and they must be approved by the Office of Management and Budget (OMB) before they are published.

At the recent hearing, Specter asked Chao to submit to his subcommittee a report addressing:

1) how the new regulations would be less complicated than the current regulations;

2) how the new regulations would improve compliance with the law;

3) how many of the 80,000 public comments to the proposed regulations have been analyzed by DOL;

4) how long it will take OMB to review the regulations; and

5) when the proposed regulations will be finalized.

Chao responded that she would answer Specter´s questions, but did not indicate when she would provide the answers.

Specter also questioned Chao about his attempts to privately discuss DOL´s proposal with her. Specter said he e-mailed Chao in November, asking her to meet with him and three other congressional members to discuss the rules. When he did not hear from Chao, he placed a call to her office, he said, but Chao never responded.

Chao replied that she never received his e-mail or phone call.

How Many Will Lose Overtime Pay?

The number of workers who will be affected by the new regulations also was discussed at the hearing. There is a major discrepancy between DOL´s estimates and those of the Economic Policy Institute´s (EPI).

DOL estimates that 644,000 workers will lose overtime protection under the proposed rules. But EPI, a Washington, D.C.-based think tank, has said that the proposed rules would make about 8 million currently nonexempt workers exempt from the FLSA´s minimum wage and overtime pay requirements.

Jared Bernstein, senior economist at EPI, said that DOL conducted a survey over one week in 2002 to determine how many nonexempt employees work more than 40 hours per week. This was confirmed by Robert Bird, senior economist at the Employment Policy Foundation, an equally respected Washington, D.C.-based think tank.

DOL found in its survey that about 11 million of the 90 million nonexempt employees worked overtime hours. DOL then examined which of those 11 million workers likely would become exempt employees under the proposed rules. DOL concluded that 644,000 employees could lose their overtime eligibility.

EPI, on the other hand, examined how many of the nation´s 90 million nonexempt employees - regardless of whether or not they worked overtime hours - would likely become exempt workers.

"We submit that an accurate answer to the question of how many workers stand to lose overtime protection from the new rule depends on examining the proposal´s impact on all covered workers," Bernstein concluded.

Bird said DOL´s analysis was correct and that EPI relied too much on speculation.

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