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The U.S. Department of Labor is expected to issue its new regulations governing overtime this week, and they will probably include major changes to a proposed draft that had outraged labor advocates and caused at least one state to change its overtime law. The AFL-CIO, for example, had claimed the proposed changes would have rendered 8 million more workers ineligible for overtime. That led Illinois earlier this month to enact a new law to protect overtime pay for that state’s workers. But Chicago attorney Camille Olson, who is close to the Bush administration, said “our best intelligence from Washington” is that the final rules will be released on April 20 or 21, and that “there will be major changes from the proposed ones.” Under the final Department of Labor (DOL) rules, Olson expects the job definitions will not change as drastically as first proposed, and the so-called “salary-level tests” will be less harsh to workers. Olson, who chairs one of the nation’s largest labor and employment practices at Seyfarth Shaw in Chicago, said the result will see about 1 million more workers exempted from overtime, rather than 8 million. A labor source, who asked not to be identified, said he understands DOL has made “substantial improvements” to the salary tests, including allowing anyone making less than $25,000 a year to qualify for overtime. The proposal set it at $22,100. He also believes that a new exemption, which as proposed denies overtime pay to employees who earn $65,000 or more a year, has been raised to $100,000. DOL spokeswoman Pamela Groover would not discuss any changes or a release date, saying that is standard procedure while the rules are under review in the Office of Management and Budget. The Labor Department knows that if the final changes are not significant, other states could follow Illinois’ lead, Olson said. She added that she knew of no other states now considering such a move. California is the only other state with such a law, and it was enacted before the DOL began discussing rule changes. For now, “Illinois employers need to comply with the new state law, where its standards are higher, as well as with the new federal regs,” according to Olson. The Illinois law retains the previous federal definitions of job categories that were in effect before the DOL-proposed changes were announced in March 2003. Olson is advising corporate clients nationwide to gather all the information they have on job descriptions, performance review standards and even r�sum�s that might affect how employees will be classified under the new federal regulations. Once the rules come down, she said, companies will need to move fast to comply-probably within 60 to 120 days. The final regulations will redefine exemptions under the Fair Labor Standards Act for the first time in more than 50 years. The act requires employers to pay overtime, at least 1 1/2 times regular pay rates, for hours worked in excess of 40 in a work week The regulations recognize five exempt categories: executive, administrative, professional, outside sales staff and computer systems professionals. But figuring out who fits into which category has not always been easy. U.S. Labor Secretary Elaine Chao said in a Senate hearing in January that the new rules were needed to clarify the definitions and to cut down the record number of overtime suits filed by employees. Such suits, often granted class action status on behalf of employees, cost businesses some $2 billion a year in “needless litigation,” Chao said. The DOL, which enforces the overtime regulations, recovered more than $212 million in back wages and assessed nearly $10 million in penalties against businesses in fiscal year 2003, a 21% increase from the record-setting amount of the year before. Multimillion-dollar suits In the most recent administrative action, DOL reported on March 29 that Siemens Building Technologies Inc. agreed to a consent judgment that paid 52 engineering employees $1.2 million in overtime back wages for alleged overtime violations. Siemens, with corporate offices in Buffalo Grove, Ill., designs and installs building controls and energy systems. Last November, the Labor Department reached agreement with T-Mobile USA to pay 20,500 workers some $4.8 million in back wages for “off-the-clock” work. And multimillion-dollar lawsuits abound. Retail giant Wal-Mart Stores Inc., for one, is fighting some three dozen overtime lawsuits in various states, while other companies settling state or federal overtime suits in the past three years include Bank of America in Washington state for $4.1 million, Perdue Farms in Delaware federal court for $10 million and Starbucks Corp. in California for $18 million. But Deborah Greenfield, associate general counsel at the AFL-CIO in Washington, said the DOL proposal did not fix anything. Some of the proposed rules blur the line between production and nonproduction employees, Greenfield said. Unless those proposals are dropped, the rules will be hard to interpret, “and the only way to resolve them will be considerable litigation,” she added. Ross Eisenbrey, vice president and policy director of the Economic Policy Institute in Washington, said he thinks the increased overtime litigation is the result of more employers violating the law and getting caught. “But the answer is not to change the law and reward [employers],” Eisenbrey said. “The answer is to enforce the law with penalties that would discourage such cheating.” The institute, a nonprofit, nonpartisan think tank that focuses on the economic condition of low- and middle-income Americans, conducted the study that reached the oft-quoted 8 million worker figure. Dan Getman, whose New Paltz, N.Y., law office represents employees in wage- and-hour suits, said the amount of litigation is growing because overtime “is one of the most violated laws on the books. Employees and employers don’t understand it.” He added that both employers and workers would benefit from clarifying the existing rules, especially the so-called white-collar exemptions. “But that doesn’t require cutting millions of workers who otherwise would have had a right to overtime,” he added. The AFL-CIO, a vocal opponent of the proposed changes, had claimed it would make the 40-hour workweek obsolete for police, firefighters, licensed practical nurses, paramedics, secretaries, paralegals, bookkeepers and low-level supervisors. Olson said market pressures, collective bargaining agreements and employee contracts can supersede the rules. She said registered nurses, for example, have always been exempt, but nearly every hospital pays them overtime for competitive reasons. Still, congressional Democrats tried to block the new regulations, leaving the fate of the new rules in doubt until their latest attempt failed in March. California attorney John Douglas, for one, is glad the DOL prevailed. “It’s high time there be changes,” Douglas said. “The rules are in many respects very vague, and [there are] real opportunities for clarification.” Douglas is senior counsel to the labor and employment group of Foley & Lardner’s San Francisco office. The question, Douglas said, is whether DOL’s changes in the final rules will be enough “to make them palatable to a large enough number of people in a presidential election year.”

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