From the July 2003 issue of Entrepreneur

In a balancing act worthy of a high-wire performer, the Labor Department has proposed changes to the law that dictates who gets overtime pay. The changes to the "white-collar exemptions" of the Fair Labor Standards Act would entitle more hourly employees to time and a half and clarify provisions that have allowed salaried workers to sue employers for overtime.

There are two different sets of problems with the current exemptions. First, the wage thresholds, last adjusted in 1975, are so low that even minimum-wage employees working 40-hour weeks qualify as "white-collar" workers who don't have to be paid overtime. The department's proposed modifications would raise the salary threshold from $155 a week to $425 a week. The impact would be to increase the wages of 1.3 million lower-income workers and reduce the number of low-wage salaried workers currently being denied overtime pay. While employers would have to pay some workers more, they would be insulated against lawsuits for violations of the complex "salary basis" test and so-called "no docking" rule. This test in effect limits employers' ability to "dock" exempt employees' pay for partial-day personal absences and disciplinary violations.

Meanwhile, the House was approving alternatives to overtime. The House Education and Workforce Subcommittee on Workforce Protections passed the Family Time Flexibility Act (H.R. 1119) on April 3. The bill allows private-sector workers to trade overtime hours worked for comp time. If the employer and the employee (or, in union shops, the union) agree, employees can begin banking up to 160 hours of paid time off, to use at the worker's discretion.


Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.