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NAM criticizes Harkin amendment passage: "Politics of fear won out over policy of reason"

Washington, D.C., May 4, 2004 – The National Association of Manufacturers (NAM) sharply criticized the Senate for passing an amendment sponsored by Sen. Tom Harkin (D-IA) that would largely prevent the first major revamping of the nation's white-collar regulations in a half-century from taking effect. Commenting on the action, NAM Human Resources Policy Vice President Sandy Boyd said, "Today the politics of fear won out over a policy of reason."

The U.S. Department of Labor (DOL) published final regulations on part 541 of the Fair Labor Standards Act (FLSA), administrative, professional, executive exemptions, and other wise known as the white-collar exemption regulations, in the Federal Register on April 23, 2004. Available at www.dol.gov/fairpay, the regulations expanded the number of workers eligible for overtime by nearly tripling the salary threshold. Under the 50-year-old regulations, only workers earning less than $8,060 annually were guaranteed overtime. Under the new rules, workers earning $23,660 or less are guaranteed overtime. This strengthens overtime protection for 6.7 million lower-wage salaried workers, including 1.3 million salaried white collar workers who are not entitled to overtime pay under the existing regulations. These workers could gain up to $375 million in additional earnings every year.

Senator Tom Harkin (D-IA), along with Sen. Edward Kennedy (D-MA) and Minority Leader Tom Daschle (D-SD) authored an amendment that would allow for the increase in the salary level for exemptions to take place and freeze all other aspects of white-collar regulations at their pre-March 2003 requirements. According to NAM, "adoption of this or similar amendments essentially prevents the DOL from updating the regulation. The amendment is a recipe for increased litigation and perpetual confusion. The Harkin amendment is based on the assumption that there currently are clear lines between exempt and nonexempt employees now, which are not there."

"The passage of this amendment represents a victory for the trial lawyer industry and a setback for employers who would much rather pay overtime to their workers than legal fees," said Boyd. "The new regulations this amendment seeks to block represent not only a significant improvement over the old, outdated system, but also over the initial draft issued last year, striking a reasonably fair compromise that will guarantee overtime for blue-collar workers and many others while providing the clarity necessary to prevent disputes and unnecessary litigation.

"By approving the amendment, the Senate succumbed to the scare tactics of labor unions and others who are more interested in scoring political points than in reforming a regulatory dinosaur that forces employers to guess where modern-day 'webmasters' and 'network engineers' fit into regulations built around 'foreman fixers,' gang leaders,' and 'linotype operators'," Boyd said. "The result is that employers today are more likely to be sued for alleged violations of the Fair Labor Standards Act than any other labor statute. Such a system is no picnic for workers either, and ultimately benefits only the lawyers. Today the politics of fear won out over a policy of reason."

A separate amendment offered by Sen. Judd Gregg (R-NH) represented "an attempt to be helpful," Boyd said, but cautioned "it could ultimately confuse things even more."

On May 4, U.S. Wage and House Division Administrator Tammy McCutchen told a Senate subcommittee that the Labor Department's new overtime security rules would strengthen and guarantee overtime pay protection for 6.7 million. McCutchen also testified that a proposed amendment by U.S. Sen. Tom Harkin (D-IA) to block the new rules "raises many questions and will put overtime protections for millions of employees at risk."

In her testimony before the Senate Appropriations Subcommittee on Labor, Health, and Human Services, and Education, McCutchen posed a number of the questions she said would put workers at risk.

"How would we determine which sections, paragraphs, or even sentences were still in effect, should the amendment pass?" McCutchen asked. "How would the amendment affect the last 50 years of federal case law, wage-and-hour opinion letters and the wage-and-hour field operations handbook—which are not reflected in the current regulations? Would all or some of these still have the force of law?

"Will new employees be subject to a different set of rules? What rules would apply to an employee who changes employers but performs the same work? It appears that the amendment could result in different employees who perform the same work for the same employer being paid differently—and that could create other legal issues.

"In short, we have opposed the amendment because we do not know what the law would be—for any employee—if the amendment is passed," McCutchen said. "We do know it would add confusion and double the litigation. The amendment would make our enforcement more difficult because each case would require two determinations instead of one: was the employee exempt under the current regulations, and whether the employee is exempt under the final regulations."