Overtime Pay Lawyers More About the FLSA  
III. A BRIGHT-LINE IS NEEDED
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     The 2004 regulations still leave us with an outdated duties test to determine which workers may be classified as exempt administrative, executive or professional employees. The objectives of such exemptions are unclear. Even if there were legitimate reasons for such exemptions, a case by case duties analysis is undesirable because classification of employees as exempt or non-exempt will become even more harrowing as the nature of our work force becomes increasingly complex. Furthermore, employers would be left with no way to classify the changing nature of the duties they require their work force to perform.

     Now is the time to determine whether there are any redeeming reasons for an overtime pay requirement. If so, a clear law must be fashioned which accounts for the evolution of our industries from industrial based businesses to high-technology, service and informational based operations. The two objectives behind the FLSA's overtime pay requirement, namely decreasing unemployment levels and helping workers with little bargaining power obtain a reasonable workweek, are not readily achieved by the FLSA, including the 2004 Fair Pay initiative.

     The overtime pay requirements are simply not well suited as a device to regulate employment levels. The Federal Unemployment Tax Act and other payroll taxes may be much better tailored for such a purpose because they can be used to discourage layoffs by increasing taxes on those employers who layoff employees.46 Similarly, costs of production, interest rates, foreign exchange rates and protectionist strategies have a much greater impact on employment levels than the number of hours worked by certain employees.47 Increased government payrolls, expanded public work projects and increased military spending also have been tried as a means to increase employment levels.48

     There is no longer a compelling reason for the federal government to require that the majority of workers receive overtime premium pay in order to increase employment levels.49 In fact in industries which compete directly with foreign companies, the FLSA's overtime pay requirement may decrease employment levels. Without becoming mired in the debate over the effects of NAFTA, suffice it to say that some employers making a decision to move positions to Mexico or other countries would be less likely to make such a move if the marginal cost of employment was not statutorily increased by the FLSA.50 If the overtime pay requirements were less costly for employers, an employer's labor costs would decrease. If the employer's profits derived from each employee increased, such employers may be encouraged to hire more workers.

     Congress' other goal in promulgating the FLSA was to prevent employers from overworking employees who may have no recourse. This goal may still hold significant weight. However, the FLSA's overtime pay requirements are not well tailored to accomplish this objective. The average workweek is increasing dramatically, while real wages are decreasing.51 There is no reasonable correlation between the workers in need of protection from excessive work schedules and the workers currently covered by the overtime provisions of the FLSA.

     The FLSA overtime pay provisions further fail because they have become so complicated that employees do not understand their rights and employers do not understand their obligations. Many employees simply do not understand whether they have a right to overtime premium pay for working over forty hours in a workweek. Because they do not know whether they are legally entitled to overtime premium pay, many employees do not question their exempt classification when they are told by their employer that they are not entitled to such pay. Further, employers are faced with such an inextricably tangled mass of regulations that they themselves are often not sure whether their employees should be classified as exempt or non-exempt from overtime pay requirements. Reform is therefore required because, no matter how well-intended the legislation, it is fatally flawed since employees do not understand their rights and employers have such a difficult time understanding their obligations.

     This does not mean, however, that there is no need for an overtime pay penalty (a maximum workweek standard) for some workers. There are social costs associated with overtime work which should not be ignored. Our economy requires that workers have free time to spend money. Our social fabric requires workers to develop friendships and family bonds, which requires non-work time.52 Our collective mental health requires that workers have non-work time. An overtime premium should be viewed as a method of taxing employers for the social cost of requiring overtime work in order to dissuade employers from requiring such work. Such a tax would then only be reasonable when there is in fact a social cost from requiring overtime work and when such a tax would be necessary to discourage such overtime work. The beneficiaries of this "tax" would be those workers working overtime.

     Senator Edward Kennedy (D-Mass.) has stated that an overtime premium is necessary to compensate employees for "denial of that employee to be with his or her family and to be able to enjoy any kind of normal existence."53 However, a "normal existence" in modern society is not based on a nine to five job or a forty hour workweek. Not all work in excess of forty hours in a workweek is undesirable.54 Many employees would prefer to take compensatory time off in lieu of receiving overtime pay to spend more time with their families during a slow week.55 Families with two wage earners may be able to spend more time with their children if the parents are able to work flexible hours. Conversely, many employers would operate more efficiently if permitted to increase their workweek. For example, some facilities are designed to run with twelve hour shifts, seven days a week. Both management and employees at some of these facilities may prefer a four day on, four day off schedule. Such a schedule is not currently permitted by the FLSA because some workweeks would necessarily be over forty hours.56

     The use of flexible work schedules instead of overtime pay by some companies, rather than harming or depriving the American worker (as Senator Kennedy seems to suggest) could actually further many important national interests.

The changes in work scheduling that have taken place during the last decade have substantially increased employee choices over their personal and professional lives. But work scheduling is more than a purely social issue; flexible work schedules can help further national goals, particularly in energy conservation and productivity growth. Compressed workweeks, for example, can substantially cut energy consumption. Flexible schedules of all kinds can raise employee morale and boost productivity. And work sharing, which avoids layoffs by distributing reduced work time among all of a plant's employees, can serve as a cushion against cyclical recessions.57

     One commentator has coined the term "equiflex", which means equitable flexibility -- "by providing reduced and restructured work-time and work-site options at wage and prorated benefit levels that make these alternative modes truly comparable to full-time, on-site work."58 The commentator believes that equiflex is necessary to build a strong, viable organization because of international market forces, to encourage our aging work force to work additional years and to help employees cope with more diverse and pressing non-work responsibilities.59

     Allowing an employee some flexibility in the type of work schedule which he follows will also improve the quality of such employee's job.

. . . From the individual worker's point of view, the ability to exercise greater choice over working time would represent a significant addition to his/her level of discretion in the workplace- extending worker influence beyond the way tasks are performed and the conditions under which they are performed, to the issue of for how long they are undertaken.60

     Reform is also needed to dissuade employers from overworking employees who may not have the bargaining power to limit their work hours and to give both employees and employers the flexibility required by our diverse work force. If properly implemented, an overtime pay premium may still help to fulfill these goals. Individuals with a high degree of skills and abilities (bargaining power) are more likely to be able to find a job which permits a satisfactory amount of non-working time.61 Such workers will be able to make their own decisions regarding the number of hours that they will work when making career decisions. Other workers may not be able to obtain a position which requires fewer hours. The overtime pay requirements should help ensure that workers who are unable to obtain positions which permit sufficient non-working time have some acceptable level of non-working time. The overtime premium may thus be viewed as a tax to encourage employers not to overwork employees who do not have the bargaining power to command a reasonable workweek.

     Many employees earning close to the minimum wage presumably do not have sufficient bargaining power (either individual or collective) to say no when requested to work in excess of forty hours. Employers will often be motivated to request such employees to work in excess of forty hours in a workweek, rather than hire additional workers. Employers would benefit from having employees work longer hours - rather than hiring additional workers, because of the high fixed costs of employment and relatively low marginal cost of overtime work. Presumably, employees would be asked to work until diminishing productivity due to long work hours reached a certain level.62

     On the other hand, higher paid workers may be voluntarily willing to work long hours to further their careers or to earn more money, or both. Many professionals must work long hours at the start of their careers as a right of passage. Other workers may be willing to work long hours because they prefer extra compensation over more non worktime. Because of the FLSA's overtime pay requirements, many employees are forced to work two jobs because their first employer will not allow overtime work. The FLSA must be more flexible so that employees and employers may make their own decisions about the length of the workweek when such decisions do not result in unwanted social costs.

     We therefore believe that legislative reform must fulfill several goals. First, workers who would be otherwise vulnerable should be protected from excessive work schedules. Second, employees should be given clear notice of whether they are entitled to overtime premium pay. Third, a legislative solution must recognize the need for flexibility in the workplace. Lastly, the legislative scheme must provide a clear framework within which employers can operate and employees can seek recourse if there is a violation.
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46. Subsidies which stimulate employers to reduce hours and increase employment have been implemented in France. White p. 77. (back)
47. International Labour Office, Employment Forecasting: The Employment Problem in Industrialised Countries (M.J.D. Hopkins ed. 1988) outlines the neo-classical, neo-Keynesian and structuralist views on regulating employment levels. All three of these schools of thought focus on making an economy stronger in order to increase employment levels, not on treating employment as a fixed commodity which may be spread among additional workers by a maximum hours standard. Id. at 239-240. (back)
48. Benjamin K. Hunnicutt, Work Without End: Abandoning Shorter Hours for the Right to Work 310 (1988). (back)
49. Indeed, one commentator believes that there is insufficient evidence to establish that a shorter workweek has ever increased employment levels. Michael White, Working Hours: Assessing the Potential for Reduction (1987) 1,28,74. White argues that if a maximum hours standard does increase employment levels, it is at the expense of the lowest wage earners. White at 29, citing Perloff and Wachter 1979. (back)
50. William Cunningham & Segundo Mercado-Llorens, The North American Free Trade Agreement: The Sale of U.S. Industry To The Lowest Bidder, 10 Hofstra Lab. L.J. 413, 428-29 (Spring 1993). The International Brotherhood of Electrical Workers reported that it lost 25,000 members whose jobs were moved to Mexico since 1985. Id. at 416. (back)
51. See Schor, supra. Other studies do not show as dramatic an increase in working hours. White p. 5, citing Owen 1978. In any event, many workers are undoubtedly working long workweeks, regardless of whether they are covered by the overtime pay provisions of the FLSA. (back)
52. See Schor, supra. See also White, supra. p. 24, 26. (back)
53. 135 Cong. Rec. 3744 (daily ed. Apr. 12, 1989) (statement of Sen. Kennedy). (back)
54. According to one commentator, "It would be presumptuous to offer a recommendation about the appropriate hours of work time. In a democratic society, this outcome should reflect the interests and views of the more than one hundred million Americans who work in the marketplace and their employers." John D. Owen, Reduced Working Hours: Cure for Unemployment or Economic Burden? 141 (1989). (back)
55. 135 Cong. Rec. S3745 (daily ed. Apr. 12, 1989). (back)
56. Interestingly, in the 1940's an argument was made that overtime penalties penalized workers because employers were required to place certain employees on inconvenient "staggered" shifts. The Department of Labor dismissed this argument by inaccurately predicting that such shifts would only be adopted by a small percentage of employers. United States Department of Labor, Wage and Hour and Public Contracts Divisions, Report and Recommendations of the Presiding officer At Public Hearings on proposed Revisions Of Regulations, Part 541 ("Stein Report") at 7 (Oct. 24, 1940). (back)
57. Work in America Institute, Inc., New Work Schedules for a Changing Society 3 (1981). This author also feels that flexible work schedules are essential to strengthening family life, and that the use of these types of work schedules would allow workers to devote more time to their personal needs (social life, leisure, education . . .) without reducing their commitment to their job. (back)
58. Barney Olmsted & Suzanne Smith, Creating a Flexible Workplace: How to Select and Manage Alternative Work Options 405 (1989). The term "flexible life scheduling" has also been used by some commentators to describe the match between individual choice over work hours and organizational requirements. See generally White, p. 74. (back)
59. Id. at 408. (back)
60. Paul Blyton, Changes in Working Time 166 (1985). (back)
61. See White p. 3, citing Owen (1979). (back)
62. White p. 95. (back)
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