Overtime Pay: The Department of Labor Initiative and Congressional Response (2003-2004)

Overtime Pay: The Department of Labor Initiative and Congressional Response (2003-2004)

Order Code RS21946
Updated February 9, 2005
CRS Report for Congress
Received through the CRS Web
Overtime Pay: The Department of Labor
Initiative and Congressional Response
(2003-2004)
William G. Whittaker
Specialist in Labor Economics
Domestic Social Policy Division
Summary
On August 23, 2004, the Department of Labor (DOL) placed in effect a new
regulation for implementation of Section 13(a)(1) of the Fair Labor Standards Act
(FLSA): an exemption from the Act’s overtime pay requirements for employers of bona
fide executive, administrative, and professional workers, outside salespersons, and
certain others. This report sketches the evolution of that initiative and suggests where
additional information about it might be found. It will not be updated unless there are
significant new administrative or legislative actions in this area.
The Fair Labor Standards Act of 1938 (29 U.S.C. §§ 201-219), as amended, is the
primary federal law governing minimum wages, overtime pay, and closely related labor
standards. Section 6 provides for a minimum wage; Section 7, a workweek of 40 hours
after which overtime pay (1½ times a worker’s regular rate of pay) is due. Section 13 sets
out exemptions from the act’s wage and hour standards. Section 13(a)(1) of the act
provides that Section 6 and Section 7 will not apply to “... any employee employed in a
bona fide executive, administrative or professional capacity” or in the capacity of outside
salesman. To it was subsequently added language exempting certain “academic
administrative personnel” and teachers “in elementary or secondary schools....”
Congress did not define the several terms but, rather, left them to be “defined and
delimited from time to time” by the Department of Labor. In October 1938, the first
federal Wage and Hour Administrator, Elmer F. Andrews, provided the original
regulation governing the Section 13(a)(1) exemption and, in it, defined the concept of
“bona fide executive, administrative or professional” workers. The “Andrews Rule” took
up two-thirds of one page in the Federal Register.1 Through the years, Andrews’
successors have modified that original rule by administrative action, adding qualifying
standards and tests for exemption and defining applicable concepts. As the regulation has
1 Federal Register, Oct. 20, 1938, p. 2518.
Congressional Research Service ˜ The Library of Congress

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evolved, two general tests for exemption have emerged: First. An exempt worker had
to be paid at a rate befitting an executive, administrator, or professional. Second. The
worker had to perform the duties of an executive, administrator, or professional. Several
standards were developed for outside sales workers and for those in educational fields.
With the passage of time, the threshold of the salary or earnings test eroded until it
closely approximated the federal minimum wage. The duties test very slowly expanded,
taking into account new types of work that had developed since the 1930s. Some argued
that each of the tests had become, by the end of the 20th century, considerably out-of-date.
On March 31, 2003, Wage and Hour Administrator Tammy McCutchen published
a new proposed rule governing Section 13(a)(1).2 During a three-month comment period
on the proposed rule, DOL received about 80,000 pieces of testimony. On April 23, 2004,
the Department published a final rule that would take effect on August 23, 2004.3 The
new/final rule, which is now operational, provides for an increase in the salary level to
qualify for exemption: a provision generally acceptable to labor. Persons earning less
that $23,660 would automatically be protected by FLSA minimum wage and overtime pay
requirements. Those earning more than $100,000 and performing any executive,
administrative or professional function, may be exempt. Between $23,660 and $100,000,
however, coverage or exemption would be determined by the duties test — substantially
redefined and, some argue, broadened significantly to expand exemption under Section
13(a)(1). Labor has objected strongly to this redefinition; employers, generally, appear
to be more supportive of the initiative.4
In its current printed form in the Federal Register, the final rule is of two parts: a
regulatory analysis and statement of intent, followed by the precise language of the rule
per se. What its impact will be is not clear. Labor Secretary Elaine Chao declared that
the rule “strengthens and clarifies” overtime protection.5 Administrator McCutchen
affirmed that the final rule is “clear, straightforward and fair.”6 But, not everyone is so
sanguine.
Ross Eisenbrey of the labor-oriented Economic Policy Institute argued that the
Department has chosen “to adopt new definitions that are unclear and new tests for
exemption that require a case-by-case analysis that will be almost impossible for Wage
2 Federal Register, Mar. 31, 2003, pp. 15560-15597. See also CRS Report RL32088, The Fair
Labor Standards Act: Historical Sketch of the Overtime Pay Requirements of Section 13(a)(1),
by William G. Whittaker.
3 Federal Register, Apr. 23, 2004, pp. 22122-22274.
4 For organized labor’s perspective, see the AFL-CIO website at [http://www.aflcio.org]. For
industry-oriented views, see the Labor Policy Association (HR Policy Association) website at
[http://www.hrpolicy.org].
5 Statement of Secretary Chao before a hearing of the House Committee on Education and the
Workforce, Apr. 28, 2004. See [http://www.dol.gov].
6 Statement of Administrator McCutchen before a hearing of the Senate Appropriations
Committee, Subcommittee on Labor, Health and Human Services, and Education, May 4, 2004.

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and Hour’s enforcement staff” — a “guaranteed recipe for litigation.”7 Senator Arlen
Specter (R-PA), who presided over several hearings on the final rule, reportedly stated
that the rule will spawn “lots of litigation, lots of class actions.” Senator Tom Harkin (D-
IA), a critic of the final rule, branded it as “anti-employee” and an “attack on the 40-hour
workweek.”8 Still, Representative John Boehner (R-OH), Chair of the House Committee
on Education and the Workforce, was up-beat: “Is it [the final rule] going to be perfect?
No. Is it a lot better than it was? Absolutely.”9
The Section 13(a)(1) exemption is potentially the broadest under the FLSA. The
Government Accountability Office (GAO) has estimated that between 19 and 26 million
workers, in 1998 (under the old rule), fell into the category of executive, administrative
or professional employees.10 Not all of these workers would necessarily be affected by
the new rule — but many could be. Deputy Wage and Hour Administrator Alfred
Robinson, addressing the potential impact of the final rule, projected that some 107,000
employees earning over $100,000 a year, satisfying other requirements of the rule, “could
be classified as exempt” — but added that DOL believed even that was “unlikely.”
(Italics in the original.) Robinson added: “... few if any workers earning between $23,660
and $100,000 are likely to lose the right to overtime pay.”11 Eisenbrey suggested that the
rule “could strip away the right to overtime pay for over six million workers.”12
Methodologies differ — and so do underlying economic assumptions. How many
workers will be affected — and which groups of workers they may be — is unclear at this
point. Much depends upon how the Department of Labor defines the various terms and
concepts imbedded within the rule, what actions employers may take to accommodate
their operations to the rule, and the general economics of the marketplace. But it may not
be unreasonable to expect the impact to be — at least potentially — substantial.
Release of the proposed rule, March 31, 2003, sparked an immediate public and
congressional reaction. The chart that follows tracks the sequence of agency actions,
hearings by committees of the Congress, legislative proposals, and related developments.
7 Eisenbrey testimony, Senate Appropriations Committee, Subcommittee on Labor, Health and
Human Services, and Education, May 4, 2004.
8 Senators Specter and Harkin are quoted in the Bureau of National Affairs, Daily Labor Report,
May 5, 2004, p. AA3.
9 Rep. Boehner, comments before the House Committee on Education and the Workforce, Apr.
28, 2004, FDCH Transcripts, p. 69.
10 U.S. General Accounting Office (now Government Accountability Office), Fair Labor
Standards Act White-Collar Exemptions in the Modern Work Place, report to the Subcommittee
on Workforce Protections, Committee on Education and the Workforce, U.S. House of
Representatives, GAO/HEHS-99-164, Sept. 1999, p. 2.
11 Testimony by Robinson, House Small Business Subcommittee on Workforce, Empowerment
and Government Programs, May 20, 2004.
12 Ross Eisenbrey, Longer Hours, Less Pay: Labor Department’s New Rules Could Strip
Overtime Protection from Millions of Workers (Washington: Economic Policy Institute, July 14,
2004), p. 1. See [http://www.epinet.org/content.cfm/briefingpapers_bp152].

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Table 1. Issue Chronology: The Department of Labor’s Section
13(a)(1) Overtime Pay Initiative and Congressional Response
Date
Action or considerationa
Mar. 31, 2003
DOL issues notice of proposed rulemaking with respect to Section 13(a)(1) of the
Fair Labor Standards Act (FLSA) and seeks comment.
June 30, 2003
Comment period on the proposed rule closes (ca. 80,000 comments received).
July 8, 2003
H.R. 2665, a bill to restrict DOL from moving forward with its proposed rule, was
introduced by Rep. Peter King (R-NY).
July 10, 2003
House votes (210 ayes to 213 nays) to reject an amendment proposed by Rep. David
Obey (D-WI) to Labor, Health and Human Services, Education, and Related
Agencies Appropriations Bill (H.R. 2660: FY2004), to prevent DOL from moving
forward with the proposed rule. (Hereafter cited as L-HHS-ED, and by fiscal year.)
July 29, 2003
S. 1485, a bill to restrict DOL from moving forward with its proposed rule, was
introduced by Sen. Edward Kennedy (D-MA).
July 31, 2003
Senate Appropriations Subcommittee on Labor, Health and Human Services, and
Education, chaired by Senator Arlen Specter (R-PA) conducts oversight hearing on
the proposed Section 13(a)(1) rule.
Sept. 9, 2003
S. 1611, a bill to create a blue ribbon commission to review the overtime
requirements of the FLSA, was introduced by Sen. Specter. Were it adopted, the
Specter proposal would hold the proposed rule in abeyance pending a report from the
commission.
Sept. 10, 2003
Senate approves (54 yeas to 45 nays) a floor amendment to H.R. 2660 (L-HHS-ED,
FY2004), proposed by Senator Tom Harkin (D-IA), to restrict DOL from moving
forward with its proposed Section 13(a)(1) rule.
Oct. 2, 2003
During appointment of House conferees on H.R. 2660 (L-HHS-ED, FY2004), the
House voted (221 yeas to 203 nays) to instruct its conferees to support the Harkin
amendment on the Section 13(a)(1) issue.
Nov. 25, 2003
Setting aside H.R. 2660 (still pending in conference), an omnibus appropriations bill
(H.R. 2673) was filed which omitted the Harkin amendment. See H.Rept. 108-401.
Dec. 8, 2003
The House approved H.R. 2673 (242 yeas to 176 nays) without dealing with the
Section 13(a)(1) overtime pay issue.
Jan. 20, 2004
Senate Appropriations Subcommittee on Labor, Health and Human Services, and
Education, chaired by Sen. Specter, conducts a second oversight hearing on the
proposed rule dealing with Section 13(a)(1).
Jan. 20, 2004
Senate commenced consideration of the conference report on the L-HHS-ED,
FY2004 appropriations bill (now, the omnibus appropriations bill, H.R. 2673).
Confronted with a Harkin amendment to restrain DOL from moving forward with its
Section 13(a)(1) initiative, Sen. William Frist (R-TN) moved for cloture. The cloture
vote failed, 48 yeas to 45 nays.b
Jan. 22, 2004
Senate concurred in a second Frist motion for cloture: 61 yeas to 32 nays (7 not
voting).b Thereafter, the Senate approved the conference report on H.R. 2673 (65
yeas, 28 nays, 7 not voting). The Section 13(a)(1) provision (Harkin amendment) was
not included.
Jan. 23, 2004
President Bush signed H.R. 2673 (P.L. 108-199).

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Date
Action or considerationa
Mar. 3, 2004
S. 1637 (“Jumpstart Our Business Strength (JOBS) Act”), a tax and trade measure,
was called up in the Senate. Sen. Harkin announced that he would offer an
amendment to restrain DOL from moving forward with the Section 13(a)(1)
initiative. (Debate continued on Mar. 4, 2004, after which the Senate moved
temporarily to other matters.)
Mar. 22, 2004
Debate on S. 1637 resumed. The Harkin amendment dealing with the Section
13(a)(1) issue was called up. With the Harkin amendment pending, Sen. Mitch
McConnell (R-KY) moved for cloture.
Mar. 24, 2004
Senate vote on cloture (S. 1637) was defeated (51 yeas to 47 nays).b The Senate
moved on to other business.
Apr. 5, 2004
Sen. Frist submitted a second motion for cloture on S. 1637.
Apr. 7, 2004
Senate voted on the Frist cloture motion on S. 1637, the motion being defeated by a
vote of 50 yeas to 47 nays.b Again, the Senate moved on to other business.
Apr. 23, 2004
The Department of Labor published in the Federal Register its final rule dealing with
overtime pay under Section 13(a)(1).
Apr. 28, 2004
The full Committee on Education and the Workforce, chaired by Rep. John Boehner
(R-OH), conducted an oversight hearing on the Department’s final rule on Section
13(a)(1).
May 4, 2004
Senate Appropriations Subcommittee on Labor, Health and Human Services, and
Education, chaired by Sen. Specter, conducted a third oversight hearing on the
Section 13(a)(1) overtime pay issue, focusing here upon the Department’s final rule.
May 4, 2004
Senate resumed consideration of S. 1637 and adopted two amendments dealing with
the Section 13(a)(1) overtime pay issue: (a) an amendment by Sen. Judd Gregg (R-
NH) listing types of work that would be exempted from any putative adverse impact
of DOL’s final rule, and (b) the Harkin amendment restraining DOL from moving
forward with implementation of its final rule. The Gregg amendment was approved
by 99 yeas (1 Senator not voting); the Harkin amendment, by 52 yeas to 47 nays.
May 12, 2004
Rep. George Miller (D-CA) moved the instruct the conferees on H.R. 2660 (L-HHS-
ED, FY2004 appropriations bill, still technically in conference) to support the Senate
(Harkin) amendment to restrict implementation of the Section 13(a)(1) overtime pay
rule. Rep. Tom DeLay (R-TX) moved to table the Miller motion — the DeLay
motion to table carrying by 222 yeas to 205 nays.
May 18, 2004
Rep. George Miller again moved to instruct the conferees on H.R. 2660 (L-HHS-ED,
FY2004 appropriations bill) to support the Senate (Harkin) amendment to restrict
implementation of the Section 13(a)(1) overtime pay rule. Rep. DeLay moved to
table the Miller motion; the DeLay motion carried, 216 yeas to 199 nays.
May 20, 2004
House Small Business Subcommittee on Workforce, Empowerment and Government
Programs, chaired by Rep. W. Todd Akin (R-MO), conducted an oversight hearing
on DOL’s final rule dealing with the overtime pay provisions of Section 13(a)(1).
June 4, 2004
Rep. William Thomas (R-CA) introduced H.R. 4520, roughly the House counterpart
to S. 1637.
June 17, 2004
H.R. 4520 was called up in the House and passed (251 yeas to 178 nays). As passed
by the House, H.R. 4520 was silent on the Section 13(a)(1) issue, including neither
the Harkin nor Gregg language.

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Date
Action or considerationa
July 14, 2004
During House Appropriations Committee consideration of the DOL appropriations
bill (L-HHS-ED, FY2005), later introduced as H.R. 5006, Rep. Obey proposed
language restricting DOL from implementing the final rule governing the overtime
pay provisions of Section 13(a)(1). The Obey amendment was defeated in the full
Committee by a vote of 31 nays to 29 yeas.
July 15, 2004
H.R. 4520 was called up in the Senate. The Senate struck all after the enacting
clause, substituted the language of S. 1637, as amended, and thereafter passed H.R.
4520 by a voice vote. As passed by the Senate, H.R. 4520 now contained both the
Harkin and Gregg amendments. The Senate immediately appointed conferees for the
measure.
Aug. 23, 2004
The Department of Labor’s final rule governing Section 13(a)(1), overtime pay, went
into effect.
Sept. 8, 2004
Office of Management and Budget issued a statement affirming that it “would
strongly oppose” and recommend that the President “veto the final version of the bill
[H.R. 5006] if it contained any provision prohibiting or altering the Labor
Department’s enforcement of the final overtime security rule.”c
Sept. 9, 2004
During House floor consideration of H.R. 5006, the L-HHS-ED, FY2005
appropriations bill, the House concurred in an amendment proposed by Rep. Obey
that would, in effect, turn back implementation of DOL’s final rule governing Section
13(a)(1) and restore the administrative status quo as of July 14, 2004 (i.e., to return
to the Section 13(a)(1) regulation as it stood prior to implementation of the new final
rule on Aug. 23, 2004). The House vote was 223 yeas to 193 nays.
Sept. 15, 2004
Senate Appropriations Committee, by a vote of 16 yeas to 13 nays, approved an
amendment to S. 2810, the L-HHS-ED, FY2005 appropriations bill, that would
prevent DOL from using any funds provided under that Act “to implement or
administer any changes to regulations regarding overtime compensation in effect on
July 14, 2004, except those changes ... specifying the amount of the salary required
to qualify as an exempt” executive, administrative or professional employee.
Further: “This provision requires the immediate re-instatement and enforcement of
the old overtime regulations in effect on July 14, 2004, except for the new section”
specifying new salary tests for exemption.d
Oct. 7, 2004
Through several days, the Senate wrestled with an amendment to the House-passed
H.R. 4520 (the “Jobs Bill”), eventually acknowledging defeat of overtime pay.
Oct. 15, 2004
DOL Solicitor Radzely observed that negative predictions “were not accurate” and
explained: “Almost without exception, the reports indicate people are gaining
overtime protection.” (e)
a. Actions and/or considerations indicated on the table, here, are described briefly. One should consult the
actual wording of the bill, amendment, et al., for a more complete understanding of what was
proposed in each instance.
b. To invoke cloture requires three-fifths of the Members duly chosen and sworn.
c. See [http://www.whitehouse.gov/omb/legislative/sap/108-2/hr5006sap-h.pdf], Executive Office of the
President, Office of Management and Budget, “Statement of Administrative Policy,” Sept. 8, 2004.
d. See U.S. Congress, Senate Committee on Appropriations, Departments of Labor, Health and Human
Services, and Education, and Related Agencies Appropriation Bill, 2005, report to accompany S.
2810, 108th Cong, 2nd sess., S.Rept. 108-345, Sept. 15, 2004, p. 24.
e. See Daily Labor Report, Oct. 18, 2004, p. A7.