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ASSESSING THE IMPACT OF THE 

LABOR DEPARTMENT’S FINAL 

OVERTIME REGULATIONS ON 

WORKERS AND EMPLOYERS

HEARING

BEFORE THE

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

April 28, 2004

Serial No. 108-54

Printed for the use of the Committee on Education and the Workforce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

or 

Committee address: http://edworkforce.house.gov 

(II)

COMMITTEE ON EDUCATION AND THE WORKFORCE 

JOHN A. BOEHNER, Ohio, Chairman

Thomas E. Petri, Wisconsin, Vice Chairman 

Cass Ballenger, North Carolina 

Peter Hoekstra, Michigan 

Howard P. ‘‘Buck’’ McKeon, California 

Michael N. Castle, Delaware 

Sam Johnson, Texas 

James C. Greenwood, Pennsylvania 

Charlie Norwood, Georgia 

Fred Upton, Michigan 

Vernon J. Ehlers, Michigan 

Jim DeMint, South Carolina 

Johnny Isakson, Georgia 

Judy Biggert, Illinois 

Todd Russell Platts, Pennsylvania 

Patrick J. Tiberi, Ohio 

Ric Keller, Florida 

Tom Osborne, Nebraska 

Joe Wilson, South Carolina 

Tom Cole, Oklahoma 

Jon C. Porter, Nevada 

John Kline, Minnesota 

John R. Carter, Texas 

Marilyn N. Musgrave, Colorado 

Marsha Blackburn, Tennessee 

Phil Gingrey, Georgia 

Max Burns, Georgia 

George Miller, California 

Dale E. Kildee, Michigan 

Major R. Owens, New York 

Donald M. Payne, New Jersey 

Robert E. Andrews, New Jersey 

Lynn C. Woolsey, California 

Rube ́n Hinojosa, Texas 

Carolyn McCarthy, New York 

John F. Tierney, Massachusetts 

Ron Kind, Wisconsin 

Dennis J. Kucinich, Ohio 

David Wu, Oregon 

Rush D. Holt, New Jersey 

Susan A. Davis, California 

Betty McCollum, Minnesota 

Danny K. Davis, Illinois 

Ed Case, Hawaii 

Rau ́l M. Grijalva, Arizona 

Denise L. Majette, Georgia 

Chris Van Hollen, Maryland 

Tim Ryan, Ohio 

Timothy H. Bishop, New York

Paula Nowakowski, Staff Director 

John Lawrence, Minority Staff Director 

(III)

C O N T E N T S 

Page

Hearing held on April 28, 2004 .............................................................................. 1

Statement of Members: 

Boehner, Hon. John A., Chairman, Committee on Education and the 

Workforce ....................................................................................................... 2

Prepared statement of ............................................................................... 4

Miller, Hon. George, Ranking Member, Committee on Education and 

the Workforce ................................................................................................ 4

Norwood, Hon. Charlie, a Representative in Congress from the State 

of Georgia, prepared statement of ............................................................... 36

Owens, Hon. Major R., a Representative in Congress from the State 

of New York, prepared statement of ........................................................... 25

Statement of Witnesses: 

Bird, Ronald E., Chief Economist, Employment Policy Foundation, Washington, DC ..................................................................................................... 41

Prepared statement of ............................................................................... 44

Chao, Hon. Elaine L., Secretary, U.S. Department of Labor, Washington, 

DC .................................................................................................................. 7

Prepared statement of ............................................................................... 9

Fortney, David S. Fortney, Esq., Partner, Fortney & Scott, LLC, Washington, DC ..................................................................................................... 52

Prepared statement of ............................................................................... 55

Smith, Karen Dulaney, Wage and Hour Consultant, Austin, TX ................ 47

Prepared statement of ............................................................................... 50

Additional materials supplied: 

AFL-CIO, Working Families e-Activist Network, TV Ad and e-mail, ‘‘Help 

Stop Bush’s Overtime Pay Take-Away with Ads’’, April 13, 2004 ............ 65

American Bankers Association (ABA), News Release, ‘‘ABA Statement 

on Labor Department Final Overtime Rule’’, April 20, 2004 .................... 100

American Insurance Association (AIA), Press Release, ‘‘AIA Praises New 

Labor Regulations’’, April 20, 2004 ............................................................. 109

Americans for Tax Reform (ATR), News, ‘‘Labor Department Announces 

New Rule to Clarify 50–Year Old Regulations and Increase Overtime 

Pay for Millions of Workers’’, April 20, 2004 .............................................. 113

The American Legion, Letter to Secretary Chao, April 26, 2004 ................. 28

Associated Builders and Contractors, Inc., (ABC), News Release, ‘‘ABC 

Applauds Labor Department Effort to Revise Outdated Rules Under 

Fair Labor Standards Act’’, April 20, 2004 ................................................. 102

Disabled American Veterans, Letter to Secretary Chao, April 26, 2004 ..... 29

Food Marketing Institute (FMI), Press Release, ‘‘Food Retailers and 

Wholesalers Applaud DOL for Rewriting Overtime Rules for the 21st 

Century Economy’’ April 20, 2004 ............................................................... 107

Fraternal Order of Police, Letter and Press Release, ‘‘Final DOL Regulations Protect and Expand Overtime for America’s First Responders’’, 

April 20, 2004 ................................................................................................ 21

Heritage Foundation, WebMemo 485,’’The New Overtime Regulations: 

Clearer Rules, Fewer Conflicts’’, April 20, 2004 ......................................... 106

Johnson, Cheryl, RN, President, United American Nurses, AFL–CIO 

(UAN), April 28, 2004 ................................................................................... 116

Mortgage Bankers Association (MBA), Statement by Kurt Pfotenhauer, 

Senior Vice President of Government Affairs, ‘‘MBA Applauds Department of Labor for Modernizing the Fair Labor Standards Act’’, April 

20, 2004 .......................................................................................................... 110

Page

IV

Additional materials supplied—Continued

National Association of Convenience Stores (NACS), Press Release, ‘‘Convenience Store Industry Commends Labor Department’s Efforts on 

‘Fair Pay’ Overtime Initiative Under FLSA’’, April 20, 2004 .................... 114

National Association of Manufacturers (NAM), Press Release, ‘‘NAM Welcomes Labor Dept. Announcement of Update of Nation’s Antiquated 

Overtime Regulations’’, April 20, 2004 ....................................................... 112

National Association of Mortgage Brokers, Press Release, ‘‘Mortgage Brokers Applaud DOL Overtime Regulations’’, April 22, 2004 ....................... 99

National Council of Chain Restaurants, of the National Retail Federation, 

News Release, ‘‘NCCR Welcomes Updated Overtime Rules’’, April 20, 

2004 ................................................................................................................ 98

National Federation of Independent Business (NFIB), News, ‘‘NFIB: DOL 

Overtime Rule Offers Clarity for Small Business’’, April 20, 2004 .......... 108

National Restaurant Association, Press Release, ‘‘National Restaurant 

Association Recognizes Labor Department’s Modernization of Overtime 

Regulations’’, April 20, 2004 ........................................................................ 111

National Retail Federation (NRF), News Release, ‘‘Retailers Welcome 

New Overtime Regulations’’, April 20, 2004 ............................................... 115

Retail Industry Leaders Association (RILA), RILA News, ‘‘Retail Industry 

Leaders Association Applauds Release of New Overtime Regulations’’, 

April 20, 2004 ................................................................................................ 101

Society for Human Resource Management (SHRM), PR Newswire, ‘‘New 

White–Collar Exemption Rules Expected to Bring Clarity to Workplace’’, April 20, 2004 .................................................................................... 103

U.S. Chamber of Commerce, Letter to Chairman John Boehner, April 

28, 2004 .......................................................................................................... 87

U.S. Chamber of Commerce, Press Release, ‘‘Chamber Welcomes White–

Collar Overtime Reform’’, April 20, 2004 .................................................... 97

U.S. Department of Labor, Fair Pay Facts, Overtime Security for the 

21st Century Workforce, ‘‘AFL–CIO Distortions Harm Workers’’ ............ 81

Veterans of Foreign Wars of the United States, Letter to Secretary Chao, 

April 22, 2004 ................................................................................................ 30

(1)

ASSESSING THE IMPACT OF THE LABOR 

DEPARTMENT’S FINAL OVERTIME 

REGULATIONS ON WORKERS AND 

EMPLOYERS 

Wednesday, April 28, 2004

U.S. House of Representatives 

Committee on Education and the Workforce 

Washington, DC 

The Committee met, pursuant to notice, at 10:35 a.m., in room 

2175, Rayburn House Office Building, Hon. John Boehner (Chairman of the Committee) presiding. 

Present: Representatives Boehner, Petri, Ballenger, Hoekstra, 

McKeon, Castle, Johnson, Norwood, Isakson, Biggert, Platts, 

Tiberi, Keller, Wilson, Cole, Porter, Kline, Carter, Blackburn, 

Gingrey, Burns, Miller, Kildee, Owens, Payne, Andrews, Woolsey, 

Hinojosa, McCarthy, Tierney, Kind, Kucinich, Wu, Holt, Davis of 

California, McCollum, Grijalva, Majette, Van Hollen, Ryan, and 

Bishop. 

Staff present: Kevin Frank, Professional Staff Member; Ed 

Gilroy, Ed, Director of Workforce Policy; Donald McIntosh, Staff 

Assistant; Jim Paretti, Professional Staff Member; Molly Salmi, 

Deputy Director of Workforce Policy; Kevin Smith, Communications Counselor, and Jo-Marie St. Margin, General Counsel; Jody 

Calemine, Minority Counsel Employer-Employee Relations; Margo 

Hennigan, Minority Legislative Assistant/Labor; Tom Kiley, Minority Press Secretary; John Lawrence, Minority Staff Director; Marsha Renwanz, Minority Legislative Associate/Labor; Amy Rosenbaum, Minority Special Assistant for Policy; Peter Rutledge, Minority Senior Legislative Associate/Labor; Michele Varnhagen, Minority Labor Counsel/Coordinator; and Mark Zuckerman, Minority 

General Counsel. 

Chairman BOEHNER. A quorum being present, the Committee on 

Education and the Workforce will come to order. We are meeting 

today to hear testimony on assessing the impact of the Labor Department’s final overtime regulations on workers and employers 

overtime regulations. For those who are standing and who would 

prefer to sit, the Committee has made available 2257 directly upstairs as an overflow room where you’ll be able to hear and see the 

testimony that the Committee will receive today. 

Opening statements are limited to the Chairman and the Ranking Member. If other Members have statements, they can be subVerDate 0ct 09 2002 12:26 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 H:\DOCS\93385 EDUWK PsN: NNIXON
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mitted for the record. And with that, I ask unanimous consent for 

the hearing record to remain open for 14 days to allow Member 

statements and any other extraneous material referenced during 

the hearing to be submitted for the official hearing record, and 

without objection, so ordered. 

STATEMENT OF HON. JOHN BOEHNER, CHAIRMAN, 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

Chairman BOEHNER. Good morning, Madam Secretary and all of 

our guests today. Thanks for coming. Today our focus will be on 

evaluating the Labor Department’s final regulations on overtime 

pay, its impact on workers and employers, and how these rules will 

work in practice. 

There’s been a lot of information and misinformation about this 

proposal, and this is why we’re here today, to hear directly from 

the Secretary of Labor and other distinguished witnesses. 

For years we’ve known that the Fair Labor Standards Act regulations governing overtime are complex, confusing and often incite 

needless litigation. As a result, these outdated rules make it next 

to impossible for workers to know whether they are entitled to 

overtime, for employers to know how to pay their employees, and 

for the Labor Department to enforce these workforce protections. 

Moreover, millions of low wage workers who should be earning 

overtime pay currently are not. 

Modernizing these decades-old regulations has been on the agenda of every administration, Republican and Democrat, for the last 

20 years. 

In March of 2003, the Department began this difficult effort by 

offering a draft proposal to update these outdated rules, which 

have not been substantially changed in 54 years. Unfortunately, 

the American people were subjected to a campaign of misinformation based on fear, distortions and untruths. Some attempted to 

paint this draft proposal as an attack on workers, falsely claiming 

it would eliminate overtime pay for millions, which is simply not 

true. 

After reviewing more than 75,000 public comments on the draft 

proposal, both positive and negative, the Department published its 

final rule last week, and I’m pleased that Secretary Chao is here 

with us today to tell us more about the facts. As Joe Friday said, 

‘‘just the facts, ma’am.’’

It’s important that we come into this hearing I think with an 

open mind and ready to listen. It’s troubling that some seem to 

have reached conclusions about the final rule even before it was 

issued last week. It appears that the Labor Department has 

worked very hard to address legitimate concerns raised by both 

workers and employers, but I want to hear directly from the Secretary and other witnesses, and this is why we’re holding this 

meeting today. 

Numerous changes were made to the final rule issued last week. 

For example, the final regulation ensures that workers making less 

than $23,600 annually will automatically be entitled to overtime 

pay. It’s unacceptable that today’s outdated regulations would 

allow someone earning as little as $8,060 to qualify as a white collar employee and therefore prevented from receiving overtime. 

3

According to the Department’s analysis, the final regulation will 

extend new overtime rights to an estimated 1.3 million American 

workers and strengthen existing overtime protections for 5.4 million working Americans. 

The Department’s economic analysis of its final overtime rule indicates few, if any, workers making less than $100,000 per year 

will be adversely affected by the final regulation. The Department 

estimates the only workers who will likely be affected are those 

making more than $100,000 annually whose white collar job responsibilities qualify them as exempt from overtime. According to 

the Department, no more than 107,000 workers nationwide fall 

into this highly compensated category. 

And finally, and I think most importantly, the Department’s final 

rule protects the overtime rights of blue collar workers, union 

workers, nurses, veterans, firefighters, policemen and similar public safety workers and responds to concerns raised with the earlier 

draft regulations during the comment period by ensuring the overtime rights of these workers are not affected under the final rule. 

Our focus here today should be putting more money into the 

pockets of working Americans, not trial lawyers. Because of confusion over these outdated rules, class action overtime lawsuits are 

now the fastest growing category of employment litigation. I had 

dinner on Saturday night with a labor attorney who basically represents employers, and he told me, he said, ‘‘If it weren’t for the 

job that I have, I’d be a plaintiff’s attorney out filing these litigation suits, class action suits on FMLA, because they are so outdated, there’s so much confusion, and I could make a whole lot of 

money.’’ I said, ‘‘Well, thank you for not doing it.’’

Doing nothing would be a victory for the trial lawyers who have 

lined their own pockets with gotcha class action lawsuits. Clearer 

rules will reduce the cost of litigation, encourage employers to hire 

more workers, and strengthen current law overtime protections for 

American workers. This is especially important for the millions of 

low wage workers who will receive new overtime pay protections 

under the final rule. 

I want to commend the Department for its willingness to make 

adjustments in the final regulation and urge everyone to listen to 

the facts and put election year politics aside. I think the Department has taken great steps and exhibited great courage in doing 

something that administrations for 20 years have attempted to do 

but never gotten very far. This is good for American workers. It’s 

good for American employers, and good for the American economy. 

And I’ll now yield to my friend and colleague, Mr. Miller. 

[The prepared statement of Chairman Boehner follows:]

4

Statement of Hon. John A. Boehner, Chairman, Committee on Education 

and the Workforce

STATEMENT OF HON. GEORGE MILLER, RANKING MEMBER, 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

Mr. MILLER. Thank you, Mr. Chairman. Thank you for holding 

this hearing, and Madam Secretary, thank you for being here. 

History very often is in the eye of the beholder. I would tell a 

different history of these regulations. I would tell a history of regulations that were published and said that they were going to 

strengthen overtime protections for workers and extend them to 

millions of low income workers, and then upon analysis of those 

regulations by many, many parties, it became very clear that not 

only would these regulations extend overtime protections to millions of low income workers, it would threaten the overtime protections to millions of other workers. 

That history is validated by the fact that on a bipartisan basis, 

both the House and the Senate rejected the idea of these regulations, and the most dramatic retreat from those original regulaVerDate 0ct 09 2002 12:26 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 H:\DOCS\93385 EDUWK PsN: NNIXON

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tions by the Department of Labor as they submit these final regulations for our consideration. 

I would suggest to you that in the time available to read and 

analyze the 530 pages of these artfully crafted new regulations, it’s 

clear to me and I think to many others who have undertaken the 

beginnings of the analysis that the policy continues, and that is to 

cut the overtime protection for millions of workers, in this instance 

those workers between the base salary of $23,660 and the ceiling 

of $100,000. 

That when you look at the number of workers who can be adversely affected in these new regulations, you start to see the potential of millions of employees who are in that situation; employees working in financial services, chefs, computer programmers, 

route drivers, assistant retail managers, preschool teachers, team 

leaders, working foremen and many other categories that are created in these regulations either in reactions to lawsuits or the interests of specific industries within the country that have been 

seeking these changes for a number of years. 

And I think that we’ll see that your dinner guest will find himself well compensated by continuing to go to court by the flood of 

litigation that will be created by the definitions within these new 

regulations. So he will continue to do very well. 

Later today we will hear from a witness, Karen Smith, who 

served as a Department of Labor Wage and Hour investigator in 

the Reagan, Bush and Clinton administrations and a management 

consultant for employers for the last several years, and will explain 

some of the nuances and the definitional context of these regulations that threaten the overtime protection of millions of workers, 

as have other analysts who have had a chance to look at these regulations. 

What I don’t understand is why we continue to see this assault 

on middle class working Americans by the Bush Administration. 

We all applauded the effort to raise the income ceiling on those 

who would be eligible for overtime protections. There was no disagreement on either side of the aisle about that effort. What we 

don’t understand why then that good deed has to be extracted by 

putting other people who have overtime rights today at risk. 

Middle class Americans face so many problems today—shrinking 

real pay, higher cost of basic benefits, greater competition for employment, downsizing, outsourcing, higher costs of higher education 

and all that goes on with maintaining your economic status in this 

country and the ability to provide for your family. But one problem 

they don’t have is too much money from overtime. 

And to suggest now that these regulations are going to start curtailing the access to overtime for millions of America’s families who 

need that. We all understand the overtime in the workplace is a 

love-hate relationship. We love it at the end of the year when it’s 

in our W–2 form, but we had it on a Friday night when we’re asked 

to work it, and we hate it when we’re asked to work overtime when 

we know we now have to adjust the time of our daycare arrangements, the time of dinner for our family, whether we’re going to 

have a vacation, whether we’re going to be able to go to the movies 

or we’re going to be able to take care of other needs of the family. 

But we work it, and we get a premium pay for that reason. 

6

Under these regulations for millions of workers in the categories 

that I have named, and we’ll go into detail later, they’re going to 

find out that they’re going to work the overtime; they’re just not 

going to get the pay. But that’s what these regulations were designed to do in a whole range of industries. 

So, again, I would go back to the original plea that many of us 

made when the initial regulations were put forth, those that have 

now been withdrawn. I would hope that we would go back to holding harmless those individuals that currently have overtime. Why 

are we taking away the overtime of these individuals when for so 

many of them, it means whether or not they qualify for the mortgage on their house, whether or not they’re going to be able to afford their car or finance their kids’ education. That’s what overtime 

means to millions of Americans. 

We wouldn’t understand that in the Congress of the United 

States, because we only work a 3-day week or a 2-day week, so we 

never get up against those 40-hour weeks here in Washington. But 

for millions of Americans, they bump up against that 40 hours all 

the time, and they then have to restructure their life in order to 

keep their job, and they should be compensated for that activity. 

So I look forward to a discussion of these regulations, but I must 

say, I must say that I am deeply disturbed that millions of Americans will have the threat to what they now have the right to, and 

that is overtime compensation for overtime worked put at risk because of these regulations. 

Thank you, Mr. Chairman. 

Chairman BOEHNER. It’s now my pleasure to introduce our first 

panel today. The Honorable Elaine Chao is the nation’s 24th Secretary of Labor, nominated by President Bush and confirmed by 

the U.S. Senate in January of 2002. Secretary Chao’s previous government career included serving as Deputy Secretary of the U.S. 

Department of Transportation, Chairman of the Federal Maritime 

Commission, and Deputy Maritime Administrator in the U.S. Department of Transportation. 

She brings a wealth of business experience to the post of labor 

secretary, having worked as vice president of syndications at Bank 

of America Capital Markets Group, and as a banker with 

Citigroup. Secretary Chao has also served as director of the Peace 

Corps and as president and CEO of the United Way of America. 

She has received her MBA from the Harvard Business School 

and her undergraduate degree in economics from Mount Holyoke 

College. 

Secretary Chao is accompanied this morning by Ms. Tammy 

McCutchen, the Administrator of the Wage and Hour Division of 

the Department of Labor, which has principal oversight over the 

nation’s Federal wage and hour laws. 

And with that, Madam Secretary, we’re glad that you’re here and 

we’re anxious to hear from you. 

7

STATEMENT OF THE HONORABLE ELAINE L. CHAO, SECRETARY, U.S. DEPARTMENT OF LABOR, ACCOMPANIED BY 

TAMMY D. McCUTCHEN, ADMINISTRATOR, WAGE AND HOUR 

DIVISION, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC 

Secretary CHAO. Thank you, Mr. Chairman, and Members of this 

Committee, for the opportunity to discuss the Department of Labor’s new overtime security rules, which are a tremendous step forward for America’s workers. 

The new rules published in the Federal Register as of April 23rd 

strengthen and guarantee overtime pay protection for an unprecedented 6.7 million additional workers. They modernize and clarify 

what’s often called white collar regulations that have not been substantially updated since 1949. As the world of work changes, these 

regulations remain frozen in time. They’re difficult and sometimes 

nearly impossible to interpret or enforce in the modern workplace. 

They list positions which no longer exist like leg man, gang leader, 

straw boss, keypunch operators. 

This rule has been on the regulatory reform agenda of the Department of Labor since 1977 when President Jimmy Carter was 

in office. Because of the ambiguity and the outdated nature of 

these rules, a lot of workers are forced to resort to lengthy court 

battles and hire—spend money and hire lawyers to find out whether they’re eligible for overtime. In fact, overtime complaints now 

generate more Federal class action lawsuits than employment discrimination class action lawsuits. 

There has to be a better way for workers to get the overtime that 

they’ve earned, and that’s why the Department has developed 

stronger, clearer overtime rules to help working families. 

The final rules dramatically increase the number of workers who 

will be guaranteed overtime because the salary threshold has nearly tripled. Under the current regulations, workers earning more 

than $8,060 annually can be classified as executives and denied 

overtime protection. Under the new rules, workers earning up to 

$23,660 annually are guaranteed overtime regardless of their job 

title or responsibilities. 

Changing the salary threshold alone ensures overall protection—

overtime protection for 6.7 million workers. That’s 1.3 million 

workers who had no right to overtime at all, and another 5.4 million workers whose overtime rights were ambiguous at best. 

The first draft of this rule did generate a great deal of interest 

and discussion. Members of Congress expressed their views, and 

we received about 75,000 comments from the public. I want to say 

that we have listened very carefully to all these comments and concerns, and we have produced a final rule that puts workers’ overtime protections first and it strengthens and clarifies their overtime protection. That’s why, for example, we took the extra step of 

spelling out in the new white collar rules who is not impacted by 

them. For the first time in history, the overtime rights of police, 

firefighters, paramedics, emergency medical technicians, other public safety employees, licensed practical nurses, are explicitly protected in the Department’s white collar overtime rules. And for the 

first time ever, the overtime rights of blue collar workers such as 

construction workers, longshoremen, factory workers, are spelled 

out plainly in these rules. 

8

The final regulations preserve overtime protections for veterans, 

cooks. They were never, never taken away. But again, to clarify 

that these overtime rules strengthen overtime protection, we have 

put in those occupations and those categories as well. 

We have also included union members and made sure that the 

final regulations preserve overtime protections for union members 

whose overtime pay is secured under a collective bargaining agreement. 

The new rules are very clear. 

One. Everyone who is paid by the hour is entitled to overtime. 

Two. All blue collar and manual laborers are entitled to overtime. 

All salaried workers earning less than $23,660 a year are entitled to overtime, period, regardless of job title or duties. 

Salaried workers. Salaried workers earning more than $23,660 

annually must be paid overtime unless they perform executive, administrative or professional duties. 

Now, unfortunately, a great deal of misinformation and distortions harmful to workers have been spread about the impact of 

these rules. 

These rules have been attacked for taking away overtime rights 

when the exact opposite is true. The new rules either preserve existing definitions of executive, professional and administrative duties or make them stronger and clearer to protect workers based 

on current Federal case law or statutes passed by the Congress. 

With these new rules, workers will clearly know their rights to 

overtime pay, employers will know what their legal obligations are, 

and this Administration, which has set new records for aggressive 

wage and hour enforcement, will have updated and strengthened 

new standards with which to vigorously enforce the rules to protect 

workers’ pay. 

In fact, just yesterday I announced a new wage and hour overtime security enforcement task force to ensure that workers’ expanded overtime rights are secured. I met with our wage and hour 

district directors and charged them to help workers and employers 

know the facts about these new rules and not be misled by misinformation that is being spread. 

The final rule gives our Department investigators the tools with 

which to ensure overtime security for millions of workers. 

I have to say this to the Committee. I am deeply concerned about 

the campaign of misinformation about these new rules. The confusion it is designed to create will only harm workers by denying 

them good information about their overtime pay rights. 

To prevent that from happening, we have put a tremendous 

amount of effort into compliance assistance and maximizing our enforcement presence. Our goal is to ensure that workers get the 

overtime pay that they’ve earned, and that’s why the Department 

has issued updated overtime rules that will strengthen and guarantee overtime protections for more workers than ever before. 

Mr. Chairman, thank you for inviting me to be here today, and 

I’ll be more than happy to answer any questions that the Committee may have. 

[The prepared statement of Secretary Chao follows:]

9

Statement of Hon. Elaine L. Chao, Secretary, U.S. Department of Labor, 

Washington, DC


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Chairman BOEHNER. Madam Secretary, we appreciate the fact 

that you’re here and again say how proud I am of you and your 

team at the Department for the job that you’re doing in the face 

of what else happens in this town. 

Now we all know there’s two things that happen in Washington. 

We do public policy, and unfortunately, we do it in a political setting. And the political battle on this issue has already begun, and 

I for one am disappointed that right out of the box, opponents of 

the Department’s effort and the administration have sought to 

sling political mud rather than to discuss the substance of the new 

regulations themselves. 

For an example, the AFL-CIO has already mischaracterized 

these regulations as a ‘‘pay cut’’ quote/unquote. In fact, I believe 

that you would estimate that these rules will result in more overtime pay going into employees’ pockets. And I’d like for you to expand on that. And as a follow-up, I think many of us would be inVerDate 0ct 09 2002 12:26 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 H:\DOCS\93385 EDUWK PsN: NNIXON

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terested to know that if this is really going to cost employers more 

money, why are so many employers wholeheartedly embracing 

these reforms? 

Secretary CHAO. I would say that there’s bipartisan support for 

reform of these rules. As I mentioned, these reforms have been on 

the regulatory agenda for well over 25 years. It’s been there since 

1977 when President Jimmy Carter was in office. 

I think what most people want is clarity. We need clarity in 

these much outdated rules so that workers know their overtime 

rights and so that employers can know what their legal obligations 

are and so the Department can again more fully vigorously enforce 

the law as well. 

So clarity is a very important part of why this updated rule is 

so much needed. 

Chairman BOEHNER. Somebody was whispering in my ear the 

other day that the AFL-CIO a week and a half before this regulation was issued were filming commercials attacking the proposed 

rule that they hadn’t even seen yet. Do you know anything about 

this? 

Secretary CHAO. The overtime rules were released on—they were 

announced on April 22nd. They were posted in the Federal Register 

on April 23rd, and the rules were not released in advance. 

Chairman BOEHNER. A number of us over the period between the 

draft regulation and the final regulation heard from nurses, both 

registered nurses and licensed practical nurses, about threats to 

their overtime. Can you explain to the Committee exactly how the 

final regulations treat registered nurses and licensed practical 

nurses, and about nurses whose overtime is guaranteed under a 

collective bargaining agreement? 

Secretary CHAO. The new overtime rules actually strengthen 

overtime for licensed practical nurses. For the very first time, 

LPNs are specifically listed as being guaranteed overtime. 

Registered nurses’ status remains unchanged. It is what the current rule says. Furthermore, registered nurses who are receiving 

overtime under collective bargaining agreements will continue to 

receive overtime, and if registered nurses are continuing to receive, 

they will continue to receive overtime. So these rules will be clarified. And, again, they are strengthened for LPNs, and the current 

rule on registered nurses will still remain the same. 

Chairman BOEHNER. Well, Madam Secretary, it’s an honor for us 

to have you here once again before our Committee. You’ve been 

here many times. You have a distinguished career in public service. 

And I can’t say it often enough how impressed I am that the Department would do something that needed to be done. Fifty-four 

years since any substantive changes to this law took place, and the 

confusion that exists in many workplaces is undeniable, both by 

employees and employers. 

And by bringing clarity to this and by doing your duty to look 

at the 75,000 comments that were made on the draft regulations, 

I think what we have before us is a set of regulations that are fair, 

that are understandable and will guarantee the overtime rights for 

millions and millions of American works. 

With that, I’ll yield to Mr. Miller. 

13

Mr. MILLER. Thank you. I’m not sure about your campaign of 

disinformation. I’m still not clear what you’re talking about, but 

let’s go to the specifics. 

First of all, in the previous proposed regulations, obviously various organizations across the country, myself included and many 

Members of the House and the Senate, talked about people who 

were going to lose their overtime under those regulations. Many of 

those people now have been explicitly exempted. So obviously there 

was some ambiguity. There was some concern about that, and 

those were changed. I don’t think that was about misinformation. 

That was about the facts of people who under those regulations 

their right to overtime was placed at risk. Those have now been 

changed. The Secretary enumerated those. So let’s just stick with 

that part of it. 

My concern is that under these regulations, there’s still significant job classifications, Madam Secretary, that are in that zone between $23,660 and $100,000 that with the new regulations will 

find themselves certainly open to question as to whether or not 

they have a right to overtime. 

The suggestion has been that registered nurses’ rights are absolutely protected. And yet the regulation has changed and the regulation appears to read that as long as they are given—before you 

start shaking your head, let me finish reading it—as long as 

they’re guarantee the $455 per week that as long as that guarantee 

is there, then they’re not necessarily guaranteed overtime as long 

as that base salary is guaranteed, and even with the insertion of 

the hourly wage in the discussion of that base salary. 

Journalists, you may have seen a number of commentaries in the 

paper, the question of whether they’re included or not included is 

a determination of whether or not they’re creative or not. If they’re 

just gathering facts and information, if they’re doing it on a big 

fire, they’re out working long hours on whatever it is, they may or 

may not be exempt under that discussion. 

Chefs, we say that those chefs that have 4-year degrees are exempt, and we describe the duties that will make the exempt. And 

yet we know there are hundreds of thousands of chefs in this country that have 2-year degrees that do those exact same—those exact 

same duties in terms of creativity and the production of food for 

restaurants. 

Working supervisors. A concern has been raised there by a number of employee organizations. The question if you’re designated a 

supervisor, and another time the separation had to be that you had 

to spend a lot of time supervising and not doing your regular work. 

You’re working in a cannery, you’re dumping tomatoes in the cannery, you’re in the dumping bay, you have three or four other bays, 

and you’re the supervisor, but all night long in your night shift 

you’re still dumping tomatoes off of the truck, are you exempt or 

aren’t you exempt? You’re now a working supervisor. In the old 

days, because most of your duties was dumping tomatoes and supervising the bay to make sure that they got to the conveyor belt, 

that they got to the sorting belt, then they got—but now you’re a 

working supervisor. 

Assistant retail managers I think provides the mechanism by 

which many retail employees will find themselves designated in 

14

managerial task. Again, they don’t have to perform any great supervisory talents, and they can certainly perform the same work as 

those that they are supervising. A distinction that used to provide 

for your right to overtime or not has now been stripped from those 

regulations. 

I think it continues to go on, and you can make this argument 

even with respect to nursery school teachers under the new definitions because of the changes that have been made there. 

Computer employees. As you know, there were exemptions and 

distinctions were drawn among computer employees for those who 

were—in the previous regulation, those who achieved a level of proficiency in theoretical and practical applications that really set 

them apart from other employees. But now we see that really entry 

level computer employees also is open to question in these regulations, serious question I believe, as to whether or not they in fact 

will be protected for overtime as they are today because those distinctions are stripped from the regulations as they currently exist. 

And so what I think you’re seeing here is that these regulations 

were written with a purpose, and they’re written with an understanding of those distinctions that protected people’s rights to overtime within those industries, because obviously, as you and the 

Chairman have stated, these regulations have not changed for a 

number of years, and so there’s a body of law that has been built 

up. There’s interpretations of your wage and hours inspections, and 

those people have their rights protected. Those now are thrown 

into jeopardy. 

Finally, on another one in the name of modernizing these rules 

in the new multi-task world, if you did inside sales at a previous 

time, you were provided overtime. But as I read the definition of 

employees in financial services generally meet their duty requirements for the administrative exemption if their duties include work 

such as collecting, analyzing information regarding the customer’s 

income, assets, investments or debts, determining which financial 

products are best to meet the customer’s needs, the financial circumstances, advising the customer regarding the advantages and 

disadvantages of different financial products, marketing, servicing 

and promoting the employer’s financial products. Individuals who 

do all those and which you find out now in the modern world if you 

call a Citicorp or you call a Wells Fargo, you find out that there’s 

one person on the other end of the line that does all of those things. 

They help you determine whether your mortgage payments are 

in line or not, but they also then start asking you if you want additional products, would you like a home equity loan, would you like 

a credit card, can they help you with a student loan. 

But the regulation says in a little however, if the employee 

whose primary duty is selling financial products, he does not qualify for this administrative exemption. But the multi-task employee 

who is selling the financial products would be exempt from overtime. So there’s a little flag at the end that says make sure you 

don’t designate these people as primarily selling the products. 

So there’s a whole class of people who had rights to overtime before who now under that definition in the new multi-task world 

will find out that they in fact do not have the availability of that 

overtime to them. And the classifications, job classifications, there 

15

are numerous other ones where these situations continue to exist 

in terms of mobile technicians, in terms of route drivers, all of 

which are brought into question by these regulations. 

I do not think that’s misinformation. I think those are very legitimate questions given the language used in the new regulations, the 

body of law that existed, both administrative law and judicial law 

that existed prior to the changes to these regulations and those 

people who are impacted by them. 

Thank you, Mr. Chairman. 

Secretary CHAO. Is there a question? 

Chairman BOEHNER. The Secretary may respond if she chooses. 

[Laughter.] 

Secretary CHAO. Well, I’m very glad, Mr. Miller, that you brought 

these concerns up. Because once again, the extent of your litany of 

occupations reflect the tremendous confusion that surrounds the 

current rule. 

Our new rules are built upon the current rule and also current 

case law. And rather than have people have to do a great deal of 

research, we have clarified these rules, encompassing once again 

current rule and case law. 

Some of the jobs that you’ve mentioned didn’t exist 40 years ago, 

which is why it is very important that this rule be updated to reflect the occupations and the positions which currently exist. 

Overtime rights are expressly guaranteed, for example, for manual and blue collar workers in what are white collar regulations. 

Because there has been disinformation going on and a lot of workers have been scared, we went the extra length of including in the 

final rule expressly overtime protection rights for workers who 

would not have normally been affected by this rule. We wanted to 

ensure that they get overtime, which is why in order to fight the 

misinformation, we made sure that their overtime guarantee rights 

were explicitly included. 

As I’ve said in my testimony, the new rules do not expand the 

category of workers who do not receive overtime. They are as equal 

or more protective than current law. And if I can, I would like to 

ask Tammy McCutchen, Administrator of Wage and Hour, to address your particular occupations. 

Ms. MCCUTCHEN. My notes, I think you mentioned eight—nine 

occupations, and I’d like to start with the last ones first. 

First, on technicians, in particular engineering technicians. In 

the preamble we cited to and agreed with the comments that were 

filed by the engineering technicians who work at Boeing, and we 

agreed with them in our preamble that they are entitled to overtime pay. 

On financial services, the section on financial services reflects the 

current sections at 201(a)(2), 205(c)(5), 205(d) and also adopts the 

current case law, Reich v. John Alden in ’97 in the First Circuit, 

Hogan v. Allstate from the 11th Circuit in 2004, and Wilson v. Allstate decided by the Middle District of Georgia in 2002. 

What we did was we took that current case law, we read what 

it said and we adopted it and put it in the regulations so that employees and employers don’t have to hire a lawyer to go find the 

case law that’s not reflected in the current regulations, because, as 

16

the Secretary said, 50 years of Federal court case law is not reflected in the current litigation. 

On computer employees, what we did on the computer employees 

is adopt virtually word for word the 1990 and 1996 statutory 

amendments passed by Congress regarding computer employees. It 

also reflects the current sections at 205(c)(7) and 207(c)(7). 

On nursery school teachers, this is one I’m particularly puzzled 

about, and I want to read to you the current regulations at 

541.301(g)(2), which regards the exemption for teachers. And what 

section says is that teaching—exempt teachers include, quote, 

‘‘teachers of kindergarten or nursery school pupils.’’ That is in current Section 541.301(g)(2). And we took the language from the 

exiting regulation and repeated it in the final. So since it’s the 

exact same words as the current regulation, it cannot be a change 

in the law or less protective than the current regulations. 

On assistant managers and working supervisors, we adopted a 

series of case law, Burger King and Dairy Queen cases. There are 

about six Federal cases cited in our preamble which discusses when 

an assistant manager is exempt and when he is not exempt. And 

in particular, we retained in the final regulation language that specifically states—and this is from—excuse me. This is from existing—it’s in the final regulation at 106(c), which specifically states 

that working supervisors and relief supervisors are entitled to overtime pay. We used two examples: a relief supervisor working on a 

production line, and an electrician who is directing the work at a 

constructionsite. 

On chefs, the rule that we adopted says that only chefs who have 

advanced 4-year college degrees in the culinary arts can be denied 

overtime pay, and we clarified that ordinary cooks and any other 

type of cook or chef who does not have a 4-year post-high school 

degree cannot be denied overtime pay. 

On journalists, our preamble discusses a series of about six cases 

that have been decided over the last 10 years defining who—which 

journalists are entitled to overtime pay and which are exempt. And 

again, what we did in our final rule is discuss the cases in the preamble, read the cases, determine what the Federal courts said and 

write that into the regulation. 

Finally, the section that you referred to on nurses about minimum guarantee plus extra, that section has been in our field operations handbook for decades. And what we did is we took a section 

that has been a long-standing position of the Department of Labor 

available to employees and employers only by filing a FOIA request 

and getting a copy of the field operations handbook, and we put 

that in the final regulation instead so that employers and employees can have easy access to a policy that’s been in place at the Department for years. 

I think I covered it all. 

Mr. MILLER. I appreciate that. And that’s your story, and stick 

to it. But again, I think if you read the language on the primary 

duties of chefs, you will see that you create a definition there of 

people who don’t have a 4-year degree who carry out those duties. 

And the same is true on financial services. 

17

Chairman BOEHNER. The gentleman’s time has expired. The 

Chair recognizes the gentleman from North Carolina, Mr. 

Ballenger. 

Mr. BALLENGER. As a member of this Committee for 20 years, 

and I’d like to say right to start with that I’ve employed people in 

my business back home since 1948, 25 at that time and 300 now, 

and if they think the rules are so simple right now, they’ve got to 

have their heads examined because supervisors have always been 

exempt as long as somebody can make up a story about what a supervisor is. And you all have firmly come out with an answer of 

what supervisor responsibilities are. 

But I’d like to—he mentioned in his opening thing about computers. And as I remember, we were here I think, the senior member and myself were both here at the time that we passed a regulation. 

Let me just ask the question. The regulations include slightly different exemption rules for computer employees, and those rules 

were mandated by us here in Congress back in 1990. Can you tell 

us briefly what those rules are and how the final regulation before 

us today affects computer employees? 

Secretary CHAO. I’d be more than glad to. As I mentioned, on the 

issue of computer technicians, we basically followed the will of Congress. And so there was a legislative act in 1996, and we basically 

incorporated what that legislative rule, or what that legislation basically said. If I can, I’ll ask Tammy to cite it in greater detail. 

Ms. MCCUTCHEN. The regulation that was passed in 1996 exempted only certain high level computer employees who were involved in design and programming. And our rule adopts that almost word for word. 

One of the things that was in the regulations before Congress 

acted and which I have heard people talk about incorrectly is that 

the Congressional action did not include a requirement that computer employees who are exempt need to exercise discretion and 

independent judgment. Our regulation prior to 1996 had included 

that additional requirement, but the Congress took it out in 1996, 

and therefore we had to take it out, we believe, in order to follow 

the will of Congress, that additional requirement. 

Everything in the computer exemption is the same as the Congressional action in 1996. 

Mr. BALLENGER. Thank you, ma’am. And, Madam Secretary, during the debate on the proposed regulation, we heard a lot of numbers thrown around, in particular a study done by an organization 

called the Employee Policy Institute, or EPI, which garnered a lot 

of media attention. And I think it’s important to note for the record 

that while EPI may call itself an objective think tank, its board of 

directors reads like a Who’s Who of organized labor, including as 

chairman of the EPI board the president of AFSCME, and as a 

board member, the secretary and treasurer of the AFL-CIO and 

current presidents in half a dozen of the country’s largest unions. 

Now these may be good and honorable people, but I wouldn’t exactly call them objective or nonpartisan. And the fact that all of 

these unions and more are listed prominently as financial donors 

and supporters of the EPI gives me some pause in accepting EPI’s 

analysis as fair and unbiased. 

18

But putting that aside, Madam Secretary, and addressing the 

EPI study on its merits, did the Department examine EPI’s report 

and the conclusions reached in its study? Which is—what is the 

Department’s response to EPI’s claims? 

Secretary CHAO. I think you also did not mention that they’re 

housed at the AFL-CIO as well. Nevertheless, the claims are false. 

Their assertions demonstrate that they do not understand the current rule. And I would like again Tammy, who has analyzed this 

study, to elaborate a bit more on that. 

Ms. MCCUTCHEN. There’s actually a very thorough response to 

the EPI study that is included in the economic report that was published with the final rule, and it’s available on the Department’s 

web page. 

In general, their report included broad classifications of employees who are entitled to overtime and will not see any change under 

this rule. For example, they included in their figures every cook in 

America. And I think that we have clarified in the final rule that 

ordinary cooks are not exempt. 

They also included a large number of employees who work only 

part time and thus by definition do not—you know, work 20 or 30 

hours a week and never get close to 40 hours a week. And so these 

types of mistakes that they’ve made about the current law continue 

to add up and makes their number far larger than it could possibly 

be when you look at the current case law. 

A good example is the computer employee example we discussed. 

How can employees be losing overtime when all we’ve done is 

adopted the will of Congress in the 1996 enactment? 

Mr. BALLENGER. Well, I’d like to thank you, Madam Secretary. 

Having been on this Committee for almost 20 years, attempting to 

correct this law is a wonderful effort on your part. And the fact is, 

it’s somewhat considered like we used to in politics used to talk 

about Social Security, touching the third rail and being electrocuted by the effort. I think you’re doing an excellent job, and I’d 

just like to thank you profusely as an employer who has been trying for 40 years to figure out how we can work out overtime, how 

you do figure overtime, how you don’t figure overtime, and it’s very 

difficult. It really is. I mean, it’s so nebulous that the description 

that we have a law that everybody can understand is making a lot 

of trial lawyers very wealthy in efforts to prove that point. 

Secretary CHAO. Thank you. Our intent as always is to strengthen and guarantee overtime protection to millions more Americans. 

Mr. BALLENGER. Thank you. 

Secretary CHAO. Thank you. 

Chairman BOEHNER. Mr. Kildee. 

Mr. KILDEE. Thank you, Mr. Chairman, Madam Secretary. I go 

home every weekend and generally after mass I go to a few union 

halls and talk to union people and they certainly were very 

alarmed when your first proposed regulations and had a $60,000 

figure, and then it was changed—well, proposed, and then changed 

to $100,000. But they’re still very skeptical. 

What assurances can I give them that the $100,000 figure will 

not be unilaterally rolled back, since this is within the purview of 

the executive branch of government, unilaterally rolled back to 

19

$60,000 or some lesser figure, or that the classifications that you 

have moved around a bit will not be changed? 

Secretary CHAO. First of all, union members covered by collective 

bargaining agreements are not impacted at all by this rule. Because of the misinformation that was being circulated, we went out 

of our way to put in the final rule express overtime guarantees for 

union members who have overtime protection under the collective 

bargaining agreement. So that’s the first point, if I could. 

Secondly, we have gone beyond what was expected, because we 

wanted to combat some of this misinformation, we expressly put 

overtime guarantees for union members who are under collective 

bargaining agreements. Because union members under collective 

bargaining agreements will abide by the collective bargaining 

agreement, and when they get overtime, that will of course remain 

the same. 

The salary level. This is a regulation. Once it goes final, it cannot 

be unilaterally rolled back. It’s not like an executive order. So the 

$100,000, first of all—I want to clarify several things, but the 

$100,000 salary threshold, that will be there because it’s part of 

the regulation. It will not be rolled back. And let me also clarify, this $100,000 does not apply to hourly 

workers. It does not apply to blue collar workers. It’s only for white 

collar workers who are in supervisory or managerial positions. 

Mr. KILDEE. First of all, I want to make it clear that labor 

unions, their interest goes beyond their own membership. They are 

concerned beyond just their own members. 

But let me ask you this question also. New Section 541(4) says 

that nothing in the regulation relieves employers from their contractual obligations under collective bargaining agreements. If the 

union contracts simply refers to applicable law for overtime eligibility, a union worker will be directly and immediately affected by 

these regulations when they take effect. Isn’t that true? 

Secretary CHAO. I’m sorry. I didn’t hear the question. If you 

could repeat that, please. 

Mr. KILDEE. If union contracts simply refers to applicable law for 

overtime eligibility, a union worker will be directly and immediately affected by the applicable law then? In other words, if the—

Secretary CHAO. No. If a worker is under a collective bargaining 

agreement, they’re covered by the collective bargaining agreement, 

and it is not impacted by these white collar regulations. 

Mr. KILDEE. But if the contract refers only to the Wage and Hour 

Act, it says the overtime shall be in accordance with the Wage and 

Hour Act, then they would be affected by your changes in the Wage 

and Hour Act. 

Secretary CHAO. Well, I don’t think so. And I will give you another example. Just because—

Mr. KILDEE. Well, they would be. 

Secretary CHAO. A collective bargaining agreement when it expires, for example, wages don’t go back to minimum wage. They’re 

$5.15. So there’s no impact for union members under collective bargaining agreements. 

Mr. KILDEE. All right. 

Secretary CHAO. And if I can ask Tammy perhaps she can clarify 

that a little bit further. 

20

Mr. KILDEE. Let me say, if the contract were to say that the overtime would be in conformity with the Wage and Hour Act, then 

that would affect the results of the contract. 

Now, if they say they have to get their own language in rather 

than the Wage and Hour Act, that puts more things on the negotiating table and creates a greater onus for the bargaining unit then 

if that’s part of the collective bargaining; whereas if they could 

refer to a reasonable Wage and Hour Act, they could feel better 

protected. 

But if they have to go beyond the Wage and Hour Act because 

they feel it no longer is protective enough, then that becomes part 

of the negotiations, which puts a greater onus. There’s only so 

much you can put on that table for negotiating. 

Secretary CHAO. As I mentioned, union members under collective 

bargaining agreements are not impacted. But let me ask Tammy 

McCutchen perhaps to clarify it even further. 

Ms. MCCUTCHEN. Thank you, Madam Secretary. First of all, a 

union member, if you’re paid by the hour you’re entitled to overtime. It doesn’t matter what’s in—that’s what these rules say. And 

so if you’re a union member who is paid by the hour, you’re entitled 

to overtime. 

If you perform blue collar or manual labor, 541.3 clearly states 

you’re entitled to overtime. So these rules strengthen protections 

for union workers no matter what’s in their collective bargaining 

agreements. 

Mr. KILDEE. You still haven’t answered my question. If—

Mr. HOEKSTRA. [presiding] The gentleman’s time has expired. 

We’re going to keep moving. I think the Secretary has limited time, 

and we obviously have a lot of member interest, so we’re going to 

try to stick to the clock a little closer. Mr. McKeon? 

Mr. MCKEON. Thank you, Mr. Chairman. Madam Secretary, I too 

want to thank you and your staff for the courage and the leadership that you’re showing in trying to protect the workforce of America. 

In the public debate on the proposed rules issued last March, we 

all heard significant concern that the proposed regulations would 

have taken overtime pay away from policemen, firefighters, EMTs 

and other first responders. In that light, I was especially pleased 

to see that the final rule issued by the Department was endorsed 

by the Fraternal Order of Police, who noted, and I quote, ‘‘These 

final regulations show that this Administration and the Department of Labor are responsive to the concerns of rank and file first 

responders.’’ End quote. 

I would first ask that the statement of the Fraternal Order of Police be inserted in the record of today’s hearing. I would also ask 

that the record include a letter from the President of the Fraternal 

Order of Police to the Committee setting forth the FOP’s views on 

these final regulations. 

Mr. HOEKSTRA. Without objection, so ordered. 

[The provided material follows:]

21

Fraternal Order of Police, Letter and Press Release, ‘‘Final DOL Regulations Protect and Expand Overtime for America’s First Responders’’, 

April 20, 2004


93385.005
22


93385.006
23


93385.007
24

Mr. MCKEON. Thank you, Mr. Chairman. That done, Madam Secretary, perhaps you could explain to us exactly how the final rule 

treats policemen, firefighters, EMTs and other first responders. 

Secretary CHAO. The final rule strengthens overtime protection 

for these workers. And the Fraternal Order of Police supported the 

rule because it provides clearer, stronger overtime protection than 

ever before. As I mentioned, the final rule includes—expressly 

states the overtime protection for police, firefighters, first responders and other public health safety workers as well. And maybe, 

Tammy, you can elaborate on that as well. 

Ms. MCCUTCHEN. We inserted a brand new section, which appears at 541.3(b), and what that does is it first of all states that, 

you know, police officers and firefighters who are doing the day by 

day work of the public agency, who are investigating crimes and 

who are fighting fires, who are interviewing witnesses and collecting evidence are entitled to overtime pay. 

And in fact, we go further. In final regulation 541.3(b)(2), (3) and 

(4), we set forth why police officers generally do not qualify as exempt executive, administrative and professional employees. 

Secretary CHAO. Thereby strengthening their overtime. 

Mr. MCKEON. Thank you, Madam Secretary. I think in your testimony you explained clearly that any worker, no matter what his 

job or her job or job title, who makes $23,660 or less is automatically entitled to overtime. And I understand that there’s a slightly 

different test for salaried employees who make more than $100,000 

a year. It seems to me that there are a lot of workers right in the 

middle of that range, people making between $23,660 and 

$100,000. What is the Department’s estimate of the impact of these 

final regulations on these workers? 

Secretary CHAO. These final rules will help to strengthen overtime for these workers as well, because the erosion in our rule—

the erosion in overtime protection comes about through the ambiguity of our rules. 

The best way we have to protect workers is to ensure that these 

outdated rules are brought up to date, that they no longer include 

positions which no longer exist, and that they fit a modern workplace. And so for the Department’s estimates of these final impacts, 

again, we’re going to get about—we’re going to increase overtime 

protection for about 6.7 million workers because of the increase in 

salary thresholds. And then of the workers above that, we expect, 

again, strengthened overtime protection as well. 

Tammy, anything? 

[No response.] 

Mr. MCKEON. Thank you very much. 

Secretary CHAO. Thank you. 

Mr. HOEKSTRA. Mr. Owens? 

Mr. OWENS. Thank you, Mr. Chairman. I’d like unanimous consent to submit a statement for the record. 

Mr. HOEKSTRA. Without objection. Which statement is that? Oh, 

your statement? 

Mr. OWENS. To submit a statement in addition to what I’m going 

to say orally. 

Mr. HOEKSTRA. Without objection, so ordered. 

[The prepared statement of Mr. Owens follows:]

25

Statement of Hon. Major R. Owens, a Representative in Congress from the 

State of New York

Mr. OWENS. I also would like to make a correction of the Secretary’s testimony. There are 2.4 million cooks employed in America. You stated that the EPI study said all 2.4 million would be exempt. EPI did not say that. EPI said about 400,000 would be exempt, and I think the record ought to be corrected in that respect. 

Secretary CHAO. I didn’t criticize EPI on that point. 

Mr. OWENS. The question of compensatory time versus cash for 

overtime has been on the agenda for the last four or 5 years. As 

the Ranking Democrat on the Workforce Protection Committee, I’ve 

had to deal with that repeatedly. You did not deal with that in 

these regulations. 

Secretary CHAO. Right. 


93385.008
26

Mr. OWENS. Compensatory time versus cash. Can we assume 

that’s off the table and that’s no longer going to be a matter of concern to the Labor Department, that we won’t have to deal with 

that? These regulations will make it clear that we’re talking about 

cash now and forever? 

Secretary CHAO. This regulation has nothing to do with comp 

time. 

Mr. OWENS. Yeah, but you’re rewriting the rules. So since you 

left that out, we can assume that—

Secretary CHAO. No. These rules have never had anything to do 

with the comp time. 

Mr. OWENS. Well, an amendment, we proposed to amend the 

rules. 

Secretary CHAO. No. 

Mr. OWENS. We proposed to amend the rules to make compensatory time—

Secretary CHAO. These are two separate issues. We never—we 

never anticipated including—

Mr. OWENS. What law would we be amending if we dealt with 

compensatory time versus cash for overtime? Overtime is only one 

law. 

Ms. MCCUTCHEN. In order for there to be comp time, it has to 

be a statutory amendment. It is the Fair Labor Standards Act, and 

that talks about when you’re entitled—

Mr. OWENS. It has to be an amendment, right, to the Wage and 

Hour Act? 

Secretary CHAO. But it is not part 541 of this rule. It’s something 

completely different. 

Ms. MCCUTCHEN. It has not been amended, and the Department 

has never suggested that it be amended. Comp time has to do—it 

only applies to employees who are entitled to overtime. These are 

about white collar workers, and so it’s a totally separate issue. We 

don’t have any authority at the Department of Labor to make the 

statutory changes that would be necessary for anything like comp 

time. 

Mr. OWENS. I’m talking about broader policy question. The Secretary is involved with policymaking. 

Chairman BOEHNER. [Presiding] If the gentleman will yield. No 

employee in the private sector is entitled to comp time in lieu of 

overtime pay. Only Federal workers, state workers and local government employees are entitled to comp time. 

Mr. OWENS. Yes. Let’s—and I was asking, Mr. Chairman—

Chairman BOEHNER. And that’s under the law, not under regulations. It’s under the law. 

Mr. OWENS. Mr. Chairman, do we have your word that this is off 

the table and we won’t have any discussion of it in the future? 

Chairman BOEHNER. Well, there’s going to be a lot of discussion 

about it, because if it’s good enough for Federal workers, state 

workers and local government workers, it ought to be good enough 

for our constituents who’d like to have compensatory time off in 

lieu of overtime pay. 

Mr. OWENS. Thank you. I have one last point I want to clarify. The $100,000 ceiling. Do we have a ceiling right now of any kind? 

Secretary CHAO. Yes. It’s about $13,000. 

27

Mr. OWENS. That’s the ceiling now? 

Secretary CHAO. Yes. That’s why it needs to be—this rule needs 

to be updated. The ceiling is currently $13,000 for highly compensated executives. This is another example why this rule needs 

to be updated. 

Mr. OWENS. A hundred thousand dollar ceiling means that that’s 

a little less than $53 an hour if you are working an hourly rate. 

If an electrician working by himself, and there may be other people 

on the job, but he basically is not supervising anybody, and he 

works in a situation where the work is seasonal or there are gaps 

between one job and another so that during the course of the year 

he makes only $50,000 or $60,000, is his hourly pay such that he 

will not be eligible for overtime because he makes $53 an hour, $60 

an hour? 

Secretary CHAO. An electrician is not what’s called under the 

terms a white collar worker. So, therefore, he would not be impacted at all by that $100,000 rule anyway. The $100,000—

Mr. OWENS. Section 541.601(a)(3) says that seasonal and project 

workers who are paid pro rata at a rate that would push them 

higher than the $100,000 ceiling, even though they won’t reach 

that mark because they only work eight or 9 months, will lose their 

rights to overtime pay. 

Maybe you can get that clarified and let us know in writing 

what—

Secretary CHAO. I think it’s pretty clear. The $100,000 is not definitive. It is only an upper salary threshold. It does not apply to 

blue collar workers. It does not apply to hourly workers. And it possibly may apply to a worker who is making $100,000 with job responsibilities that are more of a managerial or supervisory nature. 

Chairman BOEHNER. The gentleman’s time has expired. The 

Chair recognizes the gentleman from Texas, the Chairman of the 

Employee-Employer Relations Subcommittee, Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. Madam Secretary, 

you’ve already stated that you’re authorized to make these 

changes, and I think the law does say that by regulation as the 

Secretary of Labor you can change these rules, and you’ve already 

stated that Republicans and Democrats alike over the years have 

attempted to make these changes. 

And one of the changes that you made in your proposal was removing the phrase ‘‘training in the armed forces.’’ That’s so that 

anybody with military background, like mine, can obtain overtime 

pay under your regulations. 

As a matter of fact, Mr. Chairman, I’ve got three letters here 

from the American Legion, the Veterans of Foreign Wars, and the 

Disabled American Veterans all supporting this regulation. I would 

ask permission to put these into the record. 

Chairman BOEHNER. Without objection, so ordered. 

[The provided material follows:]

28

The American Legion, Letter to Secretary Chao, April 26, 2004


93385.009
29

Disabled American Veterans, Letter to Secretary Chao, April 26, 2004


93385.010
30

Veterans of Foreign Wars of the United States, Letter to Secretary Chao, 

April 22, 2004


93385.011
31

Mr. JOHNSON. Thank you, sir. These are prominent veterans 

groups, and each one is thanking the Department for its work on 

the final rule, and each is appalled at the assertions that the proposed changes target veterans. 

Having fought in two wars myself, I was particularly angered 

over the undue anxiety that was placed on those proud veterans 

who have successfully transitioned into the civilian workforce. It’s 

obvious to me that certain opponents of these regulations had 

scripted their opposition before even seeing the final regulation, as 

you indicated, Mr. Chairman. And I would ask that these letters 

be considered. 

And, Madam Secretary, do you care to explain what changes or 

clarifications were made with regards to overtime eligibility for our 

veterans? 

Secretary CHAO. I do. And let me first of all say that the statute 

does say that the Secretary has the responsibility from time to time 

to define and delimit these overtime regulations. 

In fact, in the preamble it says allowing more time to pass without updating the regulations contravenes the Department’s statutory duty to define and delimit the Sections 13(a)(1) from time to 

time. 

So in fact, we have a responsibility to keep these regulations up 

to date. 

Secondly, on the point of veterans—

Mr. JOHNSON. Well, you’re doing a good job of that too, let me 

say. 

Secretary CHAO. Thank you. Second, on the point of veterans, I 

was particularly concerned of the misinformation that’s been 

spread about the veterans’ status. So in the final rule, as I’ve mentioned, we’ve listened. We wanted to make sure that we got everything right. We went the extra step of making sure that this particular issue is addressed as well. And if I can ask Tammy to elaborate. 

Ms. MCCUTCHEN. The concern about veterans was raised under 

the professional exemption with questions about our intent on the 

educational requirements that are necessary in order to be exempt 

professionals. 

We state very clearly in the preamble, and we’ve restructured 

the professional exemption to clarify that we do not intend any 

changes to the education requirements to the professional exemption, and that’s where we took out that language regarding training 

in the armed forces, attending a technical school and attending a 

community college from the final 541.301(d). 

We also addressed veteran status, particularly in two places in 

the preamble, making it very clear that veteran status has nothing 

to do with whether or not you’re entitled to overtime. And I’d like 

to give you those pages. It’s at 69 Federal Register 22149 and 69 

Federal Register 22150. 

Mr. JOHNSON. Thank you, ma’am. I appreciate you taking care 

of our great veterans. 

Secretary CHAO. Thank you. 

Mr. JOHNSON. And I know you do consider them in every place. 

Let me ask you another, or make a statement. I understand that 

more than 340,000 workers received a record of $212.5 million in 

32

back wages as a result of the Wage and Hour Division investigations last year, up from roughly 263,000 workers. That’s another 

100,000 plus who received $175 million in back pay in 2002. 

And I just want to congratulate you on a significant improvement, something I think we would all agree is an excellent result 

and ask you what is the Department’s intent going forward with 

respect to enforcement of the new regulations. 

Secretary CHAO. Thank you for asking that. As mentioned, I met 

with the Department’s Wage and Hour district directors who are 

in charge of the investigators within the Department. 

We indeed have a very good record in terms of enforcement. We 

have recovered more back pay for workers than any other year or 

administration. And in fact, it’s an 11-year high. So it is an enforcement record that we are justly proud of. 

I met with the Wage and Hour district directors yesterday to 

charge them with helping to inform employers and workers of the 

new overtime security rules. As I mentioned, there’s been a great 

deal of misinformation and confusion about the current rule and 

about what is needed—about the final rule as well. 

So I spoke with them, and I asked that they make clarification, 

communication and enforcement of these new rules a top priority. 

These new rules are part of our enforcement effort, because the 

ambiguity in these rules are eroding workers’ rights to overtime security. 

Mr. JOHNSON. Thank you for your concern. Thank you, Mr. 

Chairman. 

Chairman BOEHNER. The gentleman’s time has expired. And if it 

weren’t for the great Wage and Hour Division at the Department 

of Labor, I wouldn’t have gotten the back pay, overtime pay that 

I was entitled to 32 years ago. 

With that, the Chair recognizes the gentleman from New Jersey, 

Mr. Payne. 

Mr. PAYNE. Thank you, Mr. Chairman. I just wondered if you 

might be able to give me the definition of team leader. 

Secretary CHAO. Sure. 

Mr. PAYNE. It’s a new category. I’m interested in what a team 

leader is. 

Secretary CHAO. Sure. Mr. Payne, I think she—

Mr. JOHNSON. Can he turn his mic on, Mr. Chairman? 

Secretary CHAO. Turn your microphone on. Anyway, I’ll be more 

than glad to answer the issue about team leaders, because that is 

also an area of confusion. 

In fact our final rule strengthens overtime protection for workers, 

because we tighten up on the language and we clarify the language 

and narrowed its scope. And, Tammy, can I ask you to answer 

that? 

Ms. MCCUTCHEN. Certainly. What I’d like to do is read you the 

current law on this section. The current law appears at 541.205(c), 

and it states that employees who can be classified as administrative exempt employees who aren’t entitled to overtime includes a, 

quote, ‘‘wide variety of persons who carry out major assignments.’’ 

So the current regulation says ‘‘a wide variety of persons who carry 

out major assignments.’’

33

What we’ve done in the final rule, which is 541.203(c), is we’ve 

stated that an employee who leads a team of other employees assigned to complete major projects for the employer, such as purchasing, selling or closing all or part of a business, negotiating a 

real estate transaction or collective bargaining agreement, or designing and implementing productivity improvements. 

That language strengthens overtime protections for employees in 

two ways. First, we say that only the leaders of these major project 

teams can be exempt rather than the current regulation, which 

says ‘‘a wide variety of employees’’ who work on major projects can 

be exempt. 

Secondly, we’ve defined what it means to carry out a major assignment and limited it to only those very significant assignments 

that happen in a corporation. We’re not talking about people who 

lead teams to buy office supplies. We’re talking about an employee 

who leads the team to purchase a business. So it’s very much tightened and more protective than the current regulatory language. 

Thank you. 

Mr. PAYNE. Well, let me just say that, you know, there seems to 

be subjectivity. When you use terms—first of all, we create this 

new category, but then when we take terms like and we say this 

is clarifying 50 years of legislation that needs changing, but we use 

things like ‘‘significantly’’ or ‘‘significantly change’’ something, you 

know, what is significant to one person may not be significant to 

someone else. And so you’re, you know, I think now we’re getting 

into subjectivity. 

And the more that we tend to make new categories which tend 

to not be very clearly, you could have five typists and someone’s got 

to maybe answer the phone and type and so that could be a team 

leader and therefore exempt. So I just think that although I looked 

at the web site and it’s called the fair pay overtime initiative, 

sounds great, I’ve listened to titles for the last three or 4 years, and 

anytime—the better the title, the worse it was for the worker—before your time, Ms. Secretary. I mean, you know, flexible family 

friendly something what’s meant, well, you don’t get overtime. You 

can work 40, 50, 60 hours without overtime, and then when it gets 

slow, the employer can say you have tomorrow off, not when you 

want it, but when they want it. 

And so we just get concerned that this tremendous new thrust 

to assist workers when we’ve been attempting to increase the minimum wage from $5.15 it’s so—gets you a little skeptical when we 

find that all of a sudden the Department of Labor is so friendly to 

workers that we want to enhance and improve them when we can’t 

even get an increase in the $5.15 minimum wage. 

And so it tends to make some of us I guess who have been for 

a while a little skeptical and leery. And so when we see new terms 

and this sort of making it better, it just seems to me to be contrary 

to just a simple basic thing as why can’t we increase the minimum 

wage in America from $5.15 an hour. So I’ll yield back. Thank you. 

Chairman BOEHNER. The Chair recognizes the gentleman from 

Georgia, Mr. Norwood, the Chairman of the Workforce Protection 

Subcommittee. 

Mr. NORWOOD. Thank you very much, Mr. Chairman. And, 

Madam Secretary, we are all delighted you’re here. I want to state 

34

for the record that I’m very grateful for what you’re doing in these 

regulations, and I’d like to thank you for the 98 percent of the 

workers in my district in Georgia that aren’t union members. 

I’d like to thank you for the employers in our district who hopefully will spend less time in court. And at the end of the day when 

the truth comes out and the facts are really known, I think probably I can come back and say I’m very grateful on behalf of the 2 

percent of the union membership in my district. 

Now you’ve pointed out a number of things to me that I find interesting. The collective bargaining agreement, as you said, overrules these regulations. So in effect, this rule doesn’t affect the 10 

percent of the members in this country that are unionized. It affects the 90 percent that aren’t, because they can fix their problems 

with a collective bargaining agreement. Isn’t that what you said to 

me, or said to us? 

Secretary CHAO. Yes. 

Mr. NORWOOD. I thought I heard it that way. There is, unhappily, during an election year, a campaign of distortion going on. My 

friend, Mr. Miller, doesn’t believe it, but it is. And my concern 

about that is that when you put out misinformation, you scare people. 

I don’t know if anybody’s trying to scare people or not, but the 

workers of the country and in fact our colleagues have a reason to 

be concerned when they look to just one think tank to get their information. I am absolutely amazed—and everybody knows how it 

happens in this town—that when in doubt, hire a think tank, pay 

them, put them in your own office building and tell them how to 

think and ask them to do an analysis that suits you. 

And I think EPI, Economic Policy Institute, has done just that. 

Their board, as you pointed out, is made up mostly of AFL-CIO 

members. They’re housed in that building. I don’t understand how 

anybody can use that as analysis, because it is going to distort the 

information during an election year. 

Further, I am amazed that the solicitation and the storyboards 

in the AFL-CIO commercial claiming that these regulations would 

take away overtime for millions of Americans. Well, of course that 

would scare people if it were true. And what amazes me is all of 

this was prepared a week or two before the final, final, final regulations was made public to anyone. 

Did the Labor Department send these folks an updated or advanced copy of these new rules? How did they know to go out and 

start having a commercial to oppose regulations if you didn’t send 

them an advance copy of the regulations? 

Secretary CHAO. No. The Department did not send an advance 

copy. 

Mr. NORWOOD. Well, why would anybody want to have a negative 

commercial airing to scare people about regulations that they didn’t 

know what the final regulation was? What is the point to that? 

Secretary CHAO. One can only ask. 

Mr. NORWOOD. Well, the political battle is on. This is what this 

is all about. You’ve done a great job helping workers. But the problem is, we’re in an election year. I’m very disappointed that right 

out of the box, opponents of your efforts and the Department’s efforts and the Administration have sought to sling political mud 

35

rather than discuss the substance of these regulations themselves, 

for which I hope we’re having a good conversation today. 

The AFL-CIO has already mischaracterized these regulations as 

a pay cut. Now my understanding is—maybe my think tank is telling me what I want to hear, too—but my understanding is that’s 

not the case. In fact, I believe you estimated that these rules will 

result in more—underline ‘‘more,’’ please, ma’am—overtime pay 

going into the pockets of the employees. 

I want you to expand on that just a little bit for me. And as a 

follow-up, I think many of us would be very interested, Madam 

Secretary, to hear why if this really will cost more money, why in 

the world have so many employers wholeheartedly embraced these 

reforms? What are they thinking about? It’s going to cost the employers of America a lot of money for you, Madam Secretary, to put 

these regs into place. Why are they supporting you on this? 

Secretary CHAO. Well, workers are going to see an increase of approximately $375 million in overtime pay. That’s what these new 

rules will accomplish. It will mean real money for workers. 

Mr. NORWOOD. You estimate that employers are going to pay 

$375 million more dollars than they pay today—

Secretary CHAO. Every year. Every year. 

Mr. NORWOOD.—to employees. Why in the world are they for 

that? 

Chairman BOEHNER. The gentleman’s time—

Mr. NORWOOD. Can the Secretary finish answering, Mr. Chairman? 

Chairman BOEHNER. The Secretary may respond. 

Secretary CHAO. I think part of it, you will have to ask—part of 

the answer, as we have seen submitted in some of the comments, 

which again, we have reviewed very carefully, is the desire for certainty and for predictability. 

And also, when the rules are unclear, workers are not protected 

either. 

[The prepared statement of Mr. Norwood follows:]

36

Statement of Hon. Charlie Norwood, a Representative in Congress from the 

State of Georgia

Chairman BOEHNER. As everyone—all the members know—the 

bells have rung. There are two votes on the House floor. We will 

proceed quickly, I hope, with Mr. Andrews and Ms. Biggert, because by the time we get back, the Secretary will have run out of 

time. And so when we resume at approximately 12:30, we will resume with our second panel. Mr. Andrews. 

Mr. ANDREWS. Thank you, Mr. Chairman. I’d like to thank the 

Secretary and welcome her back to the Committee. It’s always a 

pleasure to have her here. The good news is that I fixed the microphone. 

[Laughter.] 

Mr. ANDREWS. The bad news is that that makes me a learned 

professional so I can’t get overtime anymore and I’m very upset 

about that. 

[Laughter.] 


93385.012
37

Chairman BOEHNER. The gentleman was not entitled to overtime 

before he learned how to turn on his microphone. 

[Laughter.] 

Mr. ANDREWS. That’s because I was presumptively creative, Mr. 

Chairman. The first question I have, Madam Secretary, is about 

nursery school teachers. Assume that we have a nursery school 

teacher who makes $25,000 a year, who presently receives overtime 

if she has to teach before eight o’clock in the morning or after four 

o’clock in the afternoon and she has a bachelor’s degree in elementary and preschool education. 

Under this new rule, could her overtime be taken away? 

Secretary CHAO. Tammy, can I ask you to answer that? 

Ms. MCCUTCHEN. Sure. The current rules list nursery school 

teachers. The current regulations list nursery school teachers as 

exempt teachers under current Section 541.205(c). But I think 

that’s partly because nursery school teachers—nursery school 

doesn’t mean today what it meant back in 1949. 

Long-standing wage and hour policy which we’ve adopted in the 

preamble in the final rule states that you’re an exempt teacher if 

you’re actually teaching. The key distinction is, are you involved in 

child care or are you actually imparting knowledge? 

Mr. ANDREWS. Let’s say that what happens is the parents drop 

the children off at 7:30, and for that half hour, she’s responsible for 

starting the day, telling the children what day it is, whether it’s 

raining or sunny, and between three and four o’clock she reviews 

the lessons that were done during the day. I assume that’s teaching. So that means she’s now exempt and she would lose her overtime? 

Ms. MCCUTCHEN. It’s hard to give a clear answer without more 

facts, but I think on the facts—

Mr. ANDREWS. What more facts would you like? 

Ms. MCCUTCHEN.—she would be entitled to overtime because her 

primary duty would not be teaching. Her primary duty would be 

child care. 

Mr. ANDREWS. So the difference between eight o’clock and three 

o’clock is child care and not teaching? Who’s going to make that determination? 

Ms. MCCUTCHEN. Wage and Hour investigators with years and 

years of experience. 

Mr. ANDREWS. If she files a complaint. If she files a complaint. 

But if she just says—

Secretary CHAO. That’s why these rules are very important. 

Mr. ANDREWS. Right. 

Secretary CHAO. Because we want workers to know their rights. 

Because when they know their rights, they can file these complaints. 

Mr. ANDREWS. One thing I do want to make clear, though, she 

doesn’t make anything near $100,000 a year, but she may lose her 

overtime if the facts go the wrong way, right? This $100,000 a 

year—

Secretary CHAO. Well, right now, right now it is so confusing that 

we can’t even help her. She has to go to the courts and to hire a 

lawyer and wait a very long time before—

38

Mr. ANDREWS. But the fact of the matter is, if there’s a determination that she’s teaching between 7:30 and 8 and between 3 

and 4 in the afternoon, then she loses her overtime, right? 

Secretary CHAO. No. I’m sorry. No. I think under those facts, she 

would be entitled to overtime under existing long-standing wage 

and hour enforcement policy, and I want to emphasize again—

Mr. ANDREWS. But doesn’t this rule—this rule changes that policy, doesn’t it? 

Secretary CHAO. No. It is not a change. That policy has been in 

the field operations handbook for decades. It is a long-standing policy. We are not changing the current law. I guess I’d like—

Mr. ANDREWS. Well, let me ask a question, then. Senator Harkin 

has a piece of legislation that says that people who presently are 

protected by the overtime law will be grandfathered, or 

grandmothered in this case, and still protected. I assume that you 

would support that legislation since it simply reiterates what you 

just told me? 

Secretary CHAO. No, I do not, because Senator Harkin’s amendment will add even more confusion to an already very confused 

area. And let me give you a reason. 

Mr. ANDREWS. Well, now—

Secretary CHAO. Let me explain why. 

Mr. ANDREWS. Yeah, but, if I may, Madam Secretary, I want to 

come back to the point that your colleague made. She said that 

under my facts, the person right now is entitled to overtime and 

this doesn’t change that. Well, if that’s the case, why don’t we just 

reiterate that in the statute and say that she’s protected and it 

can’t lose it under these new rules? 

Secretary CHAO. Because the Harkin amendment would attach 

overtime guarantees to a person. So let’s use Dick Grasso as an example. Dick Grasso started out at the New York Stock Exchange 

as a stock boy. He received overtime. Under the Harkin amendment, he would be guaranteed overtime for the duration of his career, even as he receives $148 million in additional pay. 

Mr. ANDREWS. I assume you’re concerned about his other compensation he’s been guaranteed as well. Let me ask you about 

chefs, because you made a comment about chefs. If you have a chef 

that’s in the learned—excuse me, that’s in the creative professional 

category, and the chef has less than this 5 years of education, can 

the chef lose his or her overtime? 

Ms. MCCUTCHEN. What we did is we adopted in—we discussed 

in the preamble an existing wage and hour opinion letter from 

some years back about florists and when florists are creative. 

Mr. ANDREWS. Right. 

Ms. MCCUTCHEN. And we applied that to creative professional 

exemption in discussing the creative professional exemption for 

chefs. 

Mr. ANDREWS. But there are chefs that have less than this minimum academic standard who could lose their overtime under the 

new rule, correct? 

Ms. MCCUTCHEN. Only if they’re creating unique new dishes, like 

they’re creating recipes themselves. 

Mr. ANDREWS. Every chef claims that he or she does that, right? 

Chairman BOEHNER. The gentleman’s time—

39

Mr. ANDREWS. Thank you very much. 

Chairman BOEHNER. The gentleman’s time has expired. The 

Chair recognizes the gentlelady from Illinois, Ms. Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman. And first of all, let me 

associate my remarks with the Chairman’s remarks on compensatory time. That is a statutory issue which is very near and dear 

to my heart. 

Madam Secretary, thank you very much for being here. As you 

know, we’ve heard in detail about a lot of misinformation spread 

around about these regulations. One concern that I’ve heard from 

my constituents is that these regulations somehow remove the concept of the 40-hour work week or that workers who are eligible for 

overtime in a week where they work more than 40 hours will now 

have their work schedule spread over 2 weeks or 80 hours before 

they are eligible for overtime. Is that true? 

Secretary CHAO. These news rules will strengthen the 40-hour 

work week. The erosions in these rules in terms of accountability 

and relevance is hurting workers. So we need to have these—as we 

have seen already in today’s meeting, there seems to be a great 

deal of ambiguity and confusion about the current rule. 

These rules are very prescriptive, and therefore, it is necessary 

from time to time that they be updated. So in fact these rules by 

being updated will help workers with the 40-hour work week. It 

will strengthen the 40-hour work week. 

Mrs. BIGGERT. Thank you for that clarity. And one other quick 

question. Although these regulations are broadly written and cover 

employees in a wide range of industries, I know the final regulations addressed with specificity a number of industries and occupations, including the financial services industry. 

And again, opponents claim that all these workers will lose overtime pay. Can you specifically tell me how the final rules apply to 

workers in the financial services industry? I think the insurance 

adjusters and funeral directors. 

Secretary CHAO. I want to make sure that we have the exact answers, so let me ask Tammy McCutchen to address those as well. 

Ms. MCCUTCHEN. What we did in all of these categories—financial services, insurance claims adjusters and funeral directors—is 

to adopt the existing Federal court case law. And we did not just 

list their title. We took the case law and we said, for example, financial services employees who collect and analyze financial information, who provide advice and consulting to a customer about 

which financial products are appropriate, are entitled to overtime 

consistent with the Federal regulation. 

For funeral directors, there are two Federal court cases that addressed funeral directors. And what they found is that a funeral director who has 4 years, three or 4 years of education beyond high 

school are exempt professionals, and we adopt those two cases. One 

of those cases was a 7th Circuit case, and another one is a 6th Circuit case. 

And what our rule says is not all funeral directors are exempt, 

but only those who have 4 years of college-level courses and are licensed by a state that requires that. The same is true for insurance 

claims adjusters. We adopted four Federal cases that address the 

exempt status of insurance claims adjusters. 

40

Mrs. BIGGERT. And then, quickly, why did the Department specify these segments in particular? 

Ms. MCCUTCHEN. Because these were segments in particular 

that in recent years have generated a lot of confusion and a lot of 

litigation. And in order to find out if you’re in these industries, you 

can’t go to the regulations and find out whether you’re entitled to 

overtime or not. You have to basically get a lawyer who can do 

legal research for you. 

And we felt it was important because there’s been so much confusion, so much litigation, that we put it in the rule itself so that an 

employee can read the rule and find out whether they’re entitled 

to overtime pay. 

Mrs. BIGGERT. Thank you very much. I yield back. 

Chairman BOEHNER. I want to thank you, Madam Secretary, and 

thank you, Ms. McCutchen, for your excellent testimony. As I said 

earlier, just the facts. And I think both of you have presented an 

awful lot of facts to help clarify what the new rules and regulations 

regarding overtime are. 

Ms. WOOLSEY. Mr. Chairman? 

Chairman BOEHNER. The Committee—

Ms. WOOLSEY. Is there any chance being that so many members 

still want to ask questions that we could have another hearing 

with the Secretary so we could follow up—

Chairman BOEHNER. We could consider that. But under the Secretary’s agreement—

Ms. WOOLSEY. No, I understand today, but maybe even in the 

very near future? 

Chairman BOEHNER. Well, we can work with the Secretary to see 

if that’s possible. 

Ms. WOOLSEY. Thank you. 

Chairman BOEHNER. The Committee will stand in recess for approximately 30 minutes, and when we resume, we will resume with 

the second panel. 

Secretary CHAO. Thank you. 

[Recess.] 

Chairman BOEHNER. The Committee will come to order. We’ve 

completed the testimony from the Secretary, and we will now turn 

to the second panel. It’s my pleasure to introduce them and thank 

them for coming today. 

The first witness in the second panel will be Dr. Bird, who is the 

Chief Economist for the Employment Policy Foundation. Dr. Bird 

has extensive experience in labor economics research, forecasting 

survey design, data management and public policy analysis. He’s 

the author of more than 70 papers, peer-reviewed articles and reports on topics such as public policy economics, economic theory 

and analysis, the economics of education, energy economics and regional economic issues. 

Prior to joining the Employment Policy Foundation, Mr. Bird 

served as the department chair and professor of Wesleyan College’s 

Department of Economics and Finance and was an associate professor at North Carolina State University and the University of 

Alabama. Dr. Bird earned his PhD in economics from the University of North Carolina. 

41

We will then hear from Ms. Karen Dulaney Smith, a Wage and 

Hour Consultant. Ms. Smith offers consultation on wage and hour 

pay issues to employers, employees, attorneys and associations. 

Prior to entering private practice, Ms. Dulaney was an investigator 

with the Wage and Hour Division of the United States Department 

of Labor for more than 12 years, and she’s a frequent lecturer on 

these topics. 

And then last, we will hear from Mr. David Fortney, a partner 

of the firm Fortney & Scott, LLC. Mr. Fortney has practiced law 

for 23 years, and his practice focuses on workplace-related matters. 

Mr. Fortney provides broad-based experience and expertise in labor 

and employment, government relations and litigation matters. 

Mr. Fortney served as the acting solicitor of labor and has held 

other senior policy positions in the U.S. Department of Labor during the first Bush administration. And more recently, Mr. Fortney 

served as a member of the Presidential Task Force on 21st Century 

Workplace. 

And with that, I’d like to ask Mr. Bird to begin. 

STATEMENT OF RONALD E. BIRD, CHIEF ECONOMIST, 

EMPLOYMENT POLICY FOUNDATION, WASHINGTON, DC 

Mr. BIRD. Thank you, Mr. Chairman and Members of the Committee. My name is Ronald Bird. I am an economist, and I have 

spent much of the last 30 years studying the conditions and trends 

affecting the American workplace. 

I think lost in the debate over the Department of Labor’s proposed revision of the rules concerning who is exempt and not exempt under the Fair Labor Standards Act is the question of why 

amending the regulations is necessary in the first place. 

I think before considering the impact of any particular change, 

it is important to consider why reform of FLSA white collar regulations has been on the Department of Labor’s regulatory calendar 

for over 25 years in both Democratic and Republican administrations. 

The Fair Labor Standards Act was engaged in 1938, and the regulatory structure of definitions and categories of duties implementing its pay classifications have remained essentially unchanged since 1954. The minimum salary thresholds for possible 

exempt status were last changed in 1975. The law has changed little, while the workplace it governs has changed enormously. 

The FLSA was enacted when America was still in the midst of 

the Great Depression. Nearly one in five Americans who wanted a 

job could not find one. The labor supply exceeded demand, and the 

bargaining position of the typical worker was weak. The Fair Labor 

Standards Act was envisioned in part as a way to redress the perceived imbalance between employers and employees in free market 

bargaining about wages, hours and working conditions. 

Today the fundamental competitive conditions of the labor market are very different. In March 2004, the unemployment rate was 

5.7 percent, dramatically lower than the 19.1 percent in 1938. The 

peak unemployment rate following the 2001 recession was the lowest of any recession of the past 30 years and second lowest in 50 

years. 

42

An ironic indicator—an ironic indicator of the sweep of change in 

labor market conditions since the passage of FLSA in 1938 is the 

fact that many of us consider today’s 5.7 percent unemployment 

rate too high because recently we have enjoyed the benefits of it 

being even lower. 

As an employee, I like low unemployment rates. These low unemployment rates have become the norm over the past 20 years and 

will likely remain the norm in the future as an aging population 

pressures the economy to produce more goods and services with a 

relatively smaller proportion of the population active in the workforce. 

As an employee, I like the trend of lower unemployment rates 

not just because I am less likely to be unemployed, but because the 

relative scarcity of potential replacements gives me power to make 

demands about wages, hours and working conditions that my 

grandfather in 1938 would never have dared. 

Before World War II, nearly one in three workers were employed 

in manufacturing. In contrast today, one in seven works in the 

manufacturing sector. The industries that have experienced relative job growth are characterized by workplace organizations in 

which job duties are not as narrowly defined as they were in manufacturing in the 1940’s. The number of jobs where duties do not 

clearly fit the categories defined by the old FLSA rules has increased considerably. 

Managerial and professional jobs have increased more than any 

other category. In 1940, only about one in six workers were employed in managerial or professional occupations. Today, nearly one 

in three employees work in such jobs. 

The 50-year-old regulations make the process of determining 

FLSA status for workers in management and professional jobs the 

most complex and time consuming. 

It is important, too, to recognize that everyone who is eligible by 

duties for exempt status is not automatically paid on a salaried 

basis. Qualifying for exemption does mean that pay status or pay 

amount will change. For example, I used to work for a government 

contractor firm. My job duties and education qualified me for exemption as a professional, and my weekly earnings were in excess 

of the minimum thresholds. Nevertheless, my employer and I 

agreed to an hourly pay arrangement. My earnings fluctuated from 

week to week, and I was paid an overtime premium when I worked 

over 40 hours. 

Needless to say, I frequently wanted to work over 40 hours a 

week, but the boss was less frequently willing to let me work that 

many hours as I would have liked. The point is that I was an hourly worker and technically nonexempt because of the pay status 

only. My employer could have converted me to salary and exempt 

status based on my duties. That did not happen because it was in 

both of our interests to keep things on an hourly basis. 

The complexity and ambiguity of the existing rule is also evidenced by the amount of disagreement and litigation that it generates. For the past 3 years, FLSA issues, mostly related to the exempt/not exempt status question, have been the leading employment related civil action in Federal courts. 

43

Revision of FLSA regulations has been on the regulatory agenda 

for 25 years. This revision is long overdue. 

Thank you. 

[The prepared statement of Mr. Bird follows:]

44

Statement of Ronald E. Bird, Chief Economist, Employment Policy 

Foundation, Washington, DC


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Chairman BOEHNER. Thank you. 

Ms. Smith. 

STATEMENT OF KAREN DULANEY SMITH, WAGE AND HOUR 

CONSULTANT, AUSTIN, TEXAS 

Ms. SMITH. Mr. Chairman and distinguished Members of the 

Committee, my name is Karen Dulaney Smith. I’m a former United 

States Department of Labor Wage and Hour Investigator. I began 

my career in 1987 during the Reagan Administration, continued 

through the Bush Administration and into the Clinton Administration and left shortly before the birth of my second child in 1999. 

What I want you to know is that most of the flaws in this regulation are going to negatively affect workers who earn between 

$23,660 and $100,000 a year. Many of these employees work in 

businesses that the Department has identified as low-wage industries, such as the restaurant industry and the child care industry. 

Some of them are nursery school teachers, nurses, chefs, team leaders, outside salespeople and financial service employees. 

Ladies and gentlemen, this regulation is going to decrease the 

rights of workers and very little if anything to decrease the litigation that employers are currently experiencing. I cannot give you 

an estimate of the overall impact of this regulation, nor can I speak 

to every issue. Even if I were prepared to do so, you would find this 

extremely tedious. 

Some of the wording in the final rule, I am disappointed to say, 

artfully weakens the current regulation in very subtle but significant ways that will surprise employers and employees when businesses begin the implementation process. 

When I worked for the Labor Department, I represented the Secretary. I did not represent employees or employers. I realize the 

importance of having learned that. Public servants have a difficult 

obligation to balance public interest when making policy. I served 

proudly for over 12 years investigating businesses of all types 

under the laws enforced by the Division and performing other assignments, even working in Wage and Hour’s National Office for a 

short time. I was recognized on many occasions for outstanding 

performance. I maintain friendly working relationships with the 

Department, and I am sad that I feel obligated to challenge a document that I know required many hours of hard work on the part 

of intelligent and dedicated people. 

I have to do that, though. Since leaving the Wage and Hour Division, I have worked as a consultant, primarily for employers and 

their attorneys, though I have taken plaintiff’s work as well. My 

clients are corporate America, small businesses and public agencies. Their business concerns are varied: manufacturing, retail, 

technology and others. I serve as a consulting expert and expert 

witness for attorneys who are labor law specialists. They hire me 

to help them understand the regulations and Wage and Hour’s enforcement policies and procedures, and to assist their clients in 

achieving compliant business practices. 

I have chosen a variety of occupations to elucidate some of the 

more technical points of the current rule and the juxtaposition of 

the final rule. Last year I spent the entire comment period looking 

at this regulation. Obviously, I haven’t had that kind of time. 

48

I would like to talk about nursery school teachers. I saw in the 

testimony that raised significant questions. That will take me more 

than the time allotted right now. If a member would like to ask a 

question, I would be more than happy to go into that, and it may 

take me longer than 5 minutes to explain it. It is extremely complicated, but I think it’s very important, because it is going to affect 

mostly women who are working in a low-wage industry. 

There is some conversation in my testimony on registered nurses. 

Those employees were exempt under the old law as far as their duties were concerned. They are exempt now as far as their duties 

are concerned. Under a specific provision section in this newly promulgated rule that will go into effect right before Labor Day, there 

is an addition of the word ‘‘hourly’’ to a provision, and it has not 

been there before. 

Employers in the past could pay on a daily or shift basis to their 

salaried employees as long as they guaranteed a salary. Now they 

will be able to pay on an hourly basis. That has some very strong 

and frightening implications for employees who are accustomed to 

being paid hourly, or even who have been paid salary. Their pay 

levels may change. 

I’d like to discuss the matter of chefs. I’m very concerned about 

that. The restaurant industry is one of those industries that the 

Department of Labor has identified as a low-wage industry. I believe that there are people who are cooks, who may very well be 

creative, they may have a couple of years experience. But I believe 

they’re going to lose their overtime wages, and it’s very common in 

this industry to work 50 and 60 hours a week. I know, because I 

participated in targeted industry investigations. I have investigated 

hundreds of restaurants of every conceivable description. 

I want to make clear to you with regard to team leaders. That 

word is not in the current regulation. We don’t know what that’s 

going to mean. Team leaders would have been non-exempt when I 

was an investigator unless they had supervisory duties and management responsibilities. The examples that the Secretary has 

given are not exhaustive, and they are not conclusive. Those are 

not the only people who could be exempt by the addition of these 

new words. 

Also, I’d like to talk about working foremen, assistant managers 

and working supervisors. The way that this regulation is constructed makes it less obvious to me that those employees will be 

exempt employees. 

Outside sales employees. You know, I initially thought that removing that 20 percent tolerance test for outside sales employees 

might not be so harmful to outside sales employees. The Secretary 

said that she wanted to align the primary duty test as it is for executive, administrative and professional folks. The salary test is 

not aligned. We don’t have to pay outside sales folks anything. 

I want to talk about computer employees. There is a significant 

deletion in there that I think will make an impact in the computer 

industry. That’s the new production industry of the 21st century. 

And finally, I would like to discuss financial service employees. 

I believe that this and other provisions like it are loopholed for inside sales. Congress specifically said outside sales. The Secretary 

and the Administrator said that they couldn’t change that, but I 

49

believe that there is a loophole where the employers can take advantage of that if they choose to do so. 

And I believe my time is out. I’ll be glad to answer questions you 

have. Thank you so much. 

[The prepared statement of Ms. Smith follows:]

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Statement of Karen Dulaney Smith, Wage and Hour Consultant, Austin, TX


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Chairman BOEHNER. Thank you, Ms. Smith. 

Mr. Fortney. 

STATEMENT OF DAVID S. FORTNEY, ESQ., PARTNER, FORTNEY 

& SCOTT, LLC, WASHINGTON, DC 

Mr. FORTNEY. Good afternoon, Mr. Chairman and Members of 

the Committee. I would like to offer my comments that reflect both 

my current practice, which is representing predominately employers on compliance matters with the FLSA, and also takes into account my prior service as one that was charged with responsibilities for enforcing the FLSA when I was the Acting Solicitor of 

Labor. 

In a nutshell, the problem that all stakeholders face today under 

the current regulations, including employers, employees, and candidly, the Labor Department, is trying to apply these outdated regVerDate 0ct 09 2002 12:26 Oct 18, 2004 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 H:\DOCS\93385 EDUWK PsN: NNIXON

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ulations to the workplace. As a result, the outdated regulations create uncertainty and frustration. 

The salary requirements, of which there are significant improvements in the final regulations, currently frankly are a technical 

morass, resulting in hundreds if not millions of dollars in liability 

in what is nothing short of a frenzied litigation lottery to enforce 

the FLSA. That is not a good way to run these regulations or determine these very fundamental issues. 

The second area which deals with duties also is unfortunately 

under the current regs very gray. The result is that there are a 

host of typically unintended liabilities. In order to avoid that, employers are faced with the prospect of having to pay counsel, which 

respectfully to myself and others in the practice, isn’t cheap, but 

I think should be an unnecessary cost of doing business. 

I would challenge any business person to read the current regulations and understand what he or she is supposed to do. And it 

shouldn’t be that way, and it doesn’t need to be that way. And 

frankly, when you talk to the Labor Department, some of the folks 

there aren’t clear on what the current regulations are either. 

So I think this exercise is going to be extremely helpful in pulling 

that together and developing some clarification and focus. 

Now in large part—and it sounds like Ms. Smith and I may have 

some respectful disagreements over and maybe with other Members of the Committee what the effect of these changes are. But in 

large part, the predominant—the story of these new regulations is, 

they are clarifying and codifying the law that’s on the books. The 

problem is, it’s buried in Labor Department manuals, it’s buried in 

court cases, it’s buried in a lot of different places. And unless you’re 

a real expert, it’s very hard to find. 

There are several areas, though, where the regulations actually 

further narrow the grounds on which people can be exempt, meaning not get paid overtime. And probably the easiest example to look 

at is with respect to executives. The new executive exemption adds 

an additional requirement of hiring and firing authority. Today 

there are many individuals who do not get overtime. They’re salaried. They do not get overtime who do not have hire/fire authority. 

Starting August 23 when these regulations go into effect, those 

folks stand to lose that exempt status, and they will have to be 

paid overtime. 

Now with respect to other issues, as far as the administrative exemption, where I think there’s been a lot of focus and discussion, 

the fact is that although the Department proposed a different 

standard, that I think many people criticized, and the Department 

in fairness responded to that, that is what is supposed to happen 

in a rulemaking. It is an interactive process. 

The story line on the administrative is the Department responded and has retained the same standard that governs today. 

And ‘‘administrative’’ is the term that encompasses these financial 

advisors and a whole host of the occupations that are being discussed in the hearing today. 

Also, as Administrator McCutchen referenced in her earlier testimony, the regulation does a very good job of codifying or writing 

down in the four corners of the regulations the rules that are out 

54

there in the court decisions, again saving people having to pay lawyers to go look that up and understand what the rules are. 

There are similar changes with respect to the professional categories and so forth. 

Another point that I think is very important that these regs 

change is with respect to salary, and what happens if you don’t 

meet these technical requirements on paying people the correct salary. Today the answer is, you potentially stand to lose the ability 

to pay people on a salary for a whole wide range of employees. This 

is why these cases result in sometimes tens of millions of dollars 

in damages to people who are paid who got their salary, who were 

paid correctly. Now they’re just receiving this windfall. 

What the Department does is create a system now where the employers are encouraged to publish policies, to put complaint procedures in place so that people know about it, and then to take corrective action. It’s very similar to what has worked very successfully to deal with workplace harassment and the rules that 

changed there. In large part, that model has now been extended. 

It doesn’t benefit anyone to have to wait 5 years down the road, 

go through litigation to find out whether people were paid correctly 

or not. This is a very positive step forward in that regard. 

I know there are lots of specific questions on areas, and I think 

during the question and answer period I’d be happy to answer 

those. 

Thank you. 

[The prepared statement of Mr. Fortney follows:]

55

Statement of David S. Fortney, Esq., Partner, Fortney & Scott, LLC, 

Washington, DC


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Chairman BOEHNER. I want to thank all of our witnesses for 

your excellent testimony. And some of our members didn’t have an 

opportunity to question the Secretary on the first panel, and so 

what I’d like to do is begin with those members who didn’t have 

a chance. And so the Chair would recognize the gentleman from 

Florida, Mr. Keller. 

Mr. KELLER. Thank you, Mr. Chairman. I have sat patiently this 

morning listening to the examination of Secretary Chao by those 

colleagues of mine on the other side of the aisle. And after doing 

that, I am now in a position to get the bottom line on this. I can 

now sum up the Democrats’ entire platform in one word: Boo. 

They want to scare workers into thinking that they are going to 

get a pay cut with overtime regs. They’re trying to scare seniors 

about prescription drugs and Medicare. They’re trying to scare 

young people by pretending that we’re going to bring back the 

draft. All of these things are simply untrue. All of these things are 

shameless, bogus scare tactics that are specifically—

Chairman BOEHNER. If the gentleman could suspend, we’ve had 

a practice in the Committee of allowing members to disagree, but 

not being disagreeable. So I would just caution my good friend from 

Florida, we don’t want to be disagreeable in our Committee. 

Mr. KELLER. Well, I respect that comment, but I would like to 

be very specific, Mr. Chairman. I think it’s my job to represent my 

constituents as well as it’s your job to represent yours. 

On April 13th, the AFL-CIO sent out this e-mail to Working 

Families e-Activists. It says in this e-mail to click onto a link onto 

their web site. If you click onto the link on their web site, it shows 

a TV ad, and at the top of this page, it shows a police officer with 

a police car saying this comes down to protecting the 40-hour work 

week. The Bush Administration has proposed to take away overtime pay for millions of Americans who work more than 40 hours 

a week. 

This is 10 days before the regulations were even issued. Ten days 

later, on April 23, the regulations come out, and they specifically 

provide that police officers and firefighters shall be entitled to overtime pay; a specific misrepresentation. 

Now 5 days later, here we are at this hearing. And a few minutes ago, I go check the web site, and it’s still there, still the claim, 

that police officers are going to have their overtime pay taken 

away. Now why? Why would someone say that? Well, we don’t have 

to guess. The goal, according to the e-mail, is we need to raise 

money. We need to spread the word. We need to stop the overtime 

pay. We need to stop Bush overtime pay take away to raise awareness, even if it means making stuff up. 

So let’s talk about what the regs really do, and let me start with 

you, Mr. Fortney. Let’s take the example of an assistant manager 

at the local Foot Locker retail store who makes $18,000 a year in 

salary. Under these new regs, would he be entitled to get overtime 

pay? 

Mr. FORTNEY. No he would not, because he makes less than the 

floor amount of $23,660. He will get overtime pay. 

Mr. KELLER. That’s what I’m saying. He will be entitled—

Mr. FORTNEY. He will receive overtime pay. 

64

Mr. KELLER. OK. And before these regs came out, there’s a possibility he would not get overtime pay. 

Mr. FORTNEY. I would suggest to you a distinct possibility he 

would not get overtime pay. 

Mr. KELLER. OK. So he would be one of the 6.7 working Americans who would actually get strengthened under this reg? 

Mr. FORTNEY. That would be my understanding, yes. 

Mr. KELLER. Let me ask you about litigation here. My question 

goes to the need for these regulations, particularly because of the 

issue of wage and hour class action litigation. 

I understand that class action lawsuits under the Fair Labor 

Standards Act have more than tripled since 1997, and since 2001, 

they have outnumbered employment discrimination lawsuits. Tell 

us, if you would, how you believe these regs will clarify the situation to hopefully minimize these class action lawsuits. Do you have 

any examples? 

Mr. FORTNEY. Sure. I’d be happy to. One of the areas in which 

there has been a tremendous amount of litigation involves—in the 

financial industry—involves the application of what is called the 

administrative exemption, so it deals with people that are involved 

in marketing that support, provide response to customers, whether 

they be in banking, the securities industry. And there’s been extensive litigation in those fields, as well as in the insurance industry. 

The regulations have listed as examples under the administrative exemption those occupations, not just by title, but describing 

what the job duties are. And what that does effectively and very 

succinctly is, it puts down within the four corners of the regulation 

what people are now spending tens of millions of dollars to litigate 

about in the courts. 

And it effectively has what I’d call codify or written down the 

court rulings within the four corners. What that means is, when 

someone comes and first of all looks at the regulations, they can 

understand who is and is not exempt. That clarification is very, 

very important. If they want to secure an opinion from counsel, 

frankly, counsel can give an opinion with a high level of certainty, 

which does not happen today. 

Mr. KELLER. Thank you. And let me ask you to follow up on 

something Ms. Smith was talking about in terms of chefs. She testified that chefs will lose overtime. It’s my understanding that 

under current law, chefs who have a 4-year specialized academic 

degree from a culinary arts program are already exempt as learned 

professionals. And furthermore, that the new rule explicitly states 

that cooks who perform predominately routine mental, manual, 

mechanical or physical work are entitled to overtime, does it not? 

Mr. FORTNEY. That’s exactly right. 

Mr. KELLER. Doesn’t that seem to be actually more protective of 

these employees? 

Mr. FORTNEY. I think it certainly at a minimum doesn’t change 

it. It doesn’t make it so that more people are going to lose overtime. 

And the Department has said that it intends to codify what the 

current rules are, and it appears that it has done just that. 

Mr. KELLER. OK. Thank you, Mr. Chairman. I yield back the balance of my time. 

[The provided material follows:]

65

AFL-CIO, Working Families e-Activist Network, TV Ad and e-mail, ‘‘Help 

Stop Bush’s Overtime Pay Take-Away with Ads’’, April 13, 2004


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Chairman BOEHNER. The Chair recognizes the gentlelady from 

California, Ms. Woolsey. 

Ms. WOOLSEY. Thank you, Mr. Chairman. I believe that what the 

Republicans, what the Department of Labor is taking credit for is 

rules that were already in place that have not been supported over 

the last few years. So that’s codifying—they’re taking credit for the 

goodness of making what should have been happening already, 

making it happen. 

Now I want to say something about misinformation and about 

scare tactics. Anybody in this chambers that watched Harry and 

Louise during the health care debate knows what misinformation 

and scare tactics is about. 

I was a human resources professional for 20 years in manufacturing, and then 10 years I had my own company, and I advised 

high tech companies on their human resources policies and practices. So I’m going to tell you what a team leader is. 

First of all, a team leader is not a professional that’s negotiating, 

has a whole group of realtors working under a team negotiating for 

some grand project in some community, because that person is a 

professional, period, not a person paid on an hourly rate or a nonexempt person. All right. 

A team leader is a senior employee who has the background and 

the experience to probably earn the top of their pay rate. Right 

then, they’ve earned it. They’ve been around. They’ve got experience, and they’re at the top of their pay scale. And because they’ve 

been around, because they know something, they’ve been asked to 

show more junior workers how to do the work, and to give them 

confidence and to give them guidance. 

But they’re doing the work right alongside of them. This person 

today earns overtime. Without that overtime, that leader is probably going to earn less than the person that they’re working and 

guiding, because the person they will be guiding will be getting 

overtime for the same hours. 

So what are we talking about? We’re talking about people at the 

top of their pay grade getting less because they happen to be at a 

high pay grade. And I just don’t see how anybody here in this room 

can expect any of us to believe that any new rules that impact 

workers like these do, rules such as the publishers standing up and 

cheering Secretary Chao—newspaper publishers—when she announced how this would affect reporters. Because they knew they 

were going to save money, tons of money. 

Well, a rule that works for a handful of people and against most 

of the newspaper writers and reporters can’t be the rule that works 

for the people of this country. And we know that. So another rule, 

the rule—and Ms. Smith, I’m going to ask you to respond to this 

one. You brought up nursery school teachers. 

We have here at this dais talked about Head Start teachers having a 4-year degree and how important that is, how important 

these little kids are. So now under these rules, we’re going to—

have encouraged Head Start teachers to get a 4-year degree, that 

under these rules we’re going to take away their overtime. Now 

what in the world are we doing here? This is not the way we’re 

going to help the workers that need the help the most. And those 

are not earning $100,000 a year. Somebody earning $23,660 is not 

68

earning a living that they can raise a family on. They should have 

overtime. 

So would you, Ms. Smith, talk to me about what your views are 

about how these new rules have affected nursery school teachers? 

Ms. SMITH. Perhaps the Department of Labor didn’t intend in its 

construction to handle this the way they did, but here’s what the 

result is. A teacher who, for example, has an elementary or secondary certificate and is teaching in a public school, as Head Start 

teachers are, has been in the past considered exempt and will be 

in the future considered exempt. 

The real effect of this nursery school, the inclusion of a nursery 

school teacher in the way that it’s included now—the words were 

there before—it’s where they are in the regulation that is different. 

And in the interest of time, and I’ll be as detailed as you’d like me 

to be, but in the interest of time, let me point you to 303 in the 

final rule, what’s proposed here that would be passed, not the current law as it is today. It says exempt teachers include but are not 

limited to regular academic teachers, teachers of kindergarten or 

nursery school pupils. Specifically includes them in that section. 

That’s like the law that we have now. That’s not different. 

What’s different is in Part D it says the requirements of 541.300 

and subpart (g), the salary requirements of this part, do not apply 

to the teaching professions described in this section. So then you 

have—talk about a conundrum and a complication—then you need 

to go back to Section 300 and read what that is. 

And what Section 300 says, that does not apply nursery school 

teachers, they don’t have to receive a salary. That’s not different. 

They never had any salary guarantee. There was a salary exception for teachers, always has been. But they also—they do not have 

to have primary duty requiring knowledge of an advanced type in 

a field of science or learning customarily acquired by a prolonged 

course of specialized intellectual instruction, or requiring invention, 

imagination, originality or talent in a recognized field of artistic or 

creative endeavor. 

What this means is they can teach anything. And when I was an 

investigator, and I had a lot of experience with this, because 

preschools are automatically all covered under the Fair Labor 

Standards Act. Every employer has to comply with that unless they 

can exempt an employee. The only employees who were ever exempt when I made these investigations were executive directors 

and perhaps the teacher who had an early childhood, a masters in 

early childhood education, and they might have been teaching the 

pre-K or some schools do, some preschools do have kindergarten. 

Those teachers might be exempt. 

The others were considered to be lacking in independent discretion and judgment, or sufficient discretion and judgment, and a lot 

of times they didn’t have degrees. 

Mr. NORWOOD. [presiding] The gentlelady’s time has expired. 

Thank you, Ms. Smith. Mr. Kline, you’re now recognized for 5 minutes. 

Mr. KLINE. Thank you, Mr. Chairman, and thank all members of 

the panel for being here today. I guess I’d have to admit I’m getting 

a little confused with the testimony today. We seem to be hearing 

conflicting reports from the two panels and the different witnesses. 

69

And I just heard a definition of team leaders from one of my colleagues, and I was wondering if Mr. Fortney would like to comment 

on that. 

Mr. FORTNEY. I’d be happy to. I think the example that was 

given would not qualify as a team leader under the current reg. 

Let’s start with what the team leader is defined as. 

A team leader requires that it be involved in major—an employee 

who leads a team of other employees assigned to complete major 

projects for the employer—major projects. So that working side-byside, showing someone how to do something, that is not what team 

leader envisions in this reg. And with all due respect, I don’t think 

that’s what it means today under the current regs. 

Additionally, under the definition of concurrent duties, which is 

541.106, it makes clear that although an exempt person may perform nonexempt work, but it parses out how you’re to balance that. 

The example that was given is an example of people that may be 

loosely called team leaders in the nomenclature of the workplace 

but who would not be eligible to be salaried and not receive overtime. 

So I hope that answers. But it’s a—it codifies what is the rule 

today. It is narrow. It’s based on the duties, and it has to be a 

major project in order to be ineligible for overtime. 

Mr. KLINE. Thank you. My wife spent over 30 years as a registered nurse, and so the issue of nurses has come up again and 

again. And I think it’s important that we revisit that one more 

time. 

So let me go back again to you, Mr. Fortney, because Ms. Smith 

has expressed a concern about the effect of the new regulation on 

nurses. But it’s been my understanding that the final rulemakes no 

change to regulation governing registered nurses, who have always 

generally been exempt as professionals, even though they are often 

paid overtime because of their collective bargaining agreements, 

which many are members, or because of the fact that we have a 

nursing shortage. 

And my family takes some blame for that, because my wife has 

now retired as a nurse, but my niece is entering the field. So we’re 

trying to keep it even. 

And it’s my understanding also that licensed practical nurses are 

explicitly exempt in this new regulations, and I read Ms. Smith’s 

testimony and listened to what she had to say about hourly pay, 

and, quote, ‘‘the minimum guarantee plus extras.’’ And could you, 

Mr. Fortney, explain to us exactly what this means from your perspective, and is it a change from current regulations? 

Mr. FORTNEY. Sure. I’d be happy to address that. Nurses. We 

now have an explicit provision within the four corners of the regulations dealing with nurses. It’s very short. Registered nurses who 

are registered by the appropriate state examining board generally 

meet the duties and requirements for the learned professional exemption. Licensed practical nurses, LPNs and other similar health 

care employees, however, generally do not qualify as exempt. In 

plain speaking, LPNs and others get overtime; RNs are not—can 

properly be salaried and not receive overtime. 

With respect to what does it mean to pay on salary, it means a 

number of things under the regulations. Again, it does today and 

70

it has for a long time. The regulations going back to the—the Labor 

Department has a series of manuals that are called field operation 

handbook, and it defines in great detail how people can be paid a 

salary. 

And salary—it can be computed on an hourly basis. It can be 

paid on an hourly basis. The rule in the current regulation defines 

salary. So even if people are paid hourly, as long as you meet the 

minimums and it’s expressed ultimately in terms of a fixed 

amount, it is permissible. 

So I think that is the reason why there may be some confusion 

on this. And in the reality, I think many RNs, as you indicate in 

your question, although they can be exempt—that means salaried, 

not receive overtime—in the real world, many of them do receive 

a whole variety of additional premiums—shift premiums, overtime, 

et cetera. So that’s a marketplace factor as distinguished from 

what the law requirements. 

Mr. KLINE. And there’s not a change? 

Mr. FORTNEY. It is not a change. It is absolutely more—continues 

what is there. Makes it clear, puts it within the four corners of the 

reg. 

Ms. SMITH. Would the Chair recognize me to respond as well? 

Mr. KLINE. I’d be happy to have you respond, Ms. Smith. 

Ms. SMITH. Thank you. In this section—

Mr. NORWOOD. Ms. Smith, his time is almost up. Be as brief as 

you can. 

Ms. SMITH. OK. The minimum guarantee plus extras adds the 

new word ‘‘hourly.’’ Registered nurses who are paid hourly, as long 

as they are guaranteed a minimum amount, which is supposed to 

bear a reasonable relationship to the salary for their usual hours—

those are new words. We don’t know exactly what that’s going to 

mean yet—there is a possibility that registered nurses can be paid 

hourly and not receive overtime. And that’s my concern. 

Mr. NORWOOD. As long as we have lawyers and write new laws 

and write new regulations, anything’s a possibility. That’s understood and a given. But sometimes you have to move forward hoping 

you understand what it means until some smart lawyer comes and 

tells you you don’t understand what it means. 

And in fact, speaking of smart lawyers, Mr. Tierney, you have 5 

minutes. 

Mr. TIERNEY. Thank you very much, Mr. Chairman. Mr. Chairman, I think it’s a little bit unfortunate that this hearing has actually happened before most people have had an opportunity to really 

digest the complications that are in the new rule. And I hope that 

the Secretary will come back after people have had a chance to 

analyze that. 

But in the meantime, it’s ambiguous to some of us and a little 

higher burden to ask about some of the detail. So I hope people will 

bear with us. And I regret some of the defensiveness that the Administration and the Secretary are going through, but they I hope 

understand that this is not an Administration that’s been highly 

credible to working families and the American worker on a number 

of issues, whether it be the Secretary’s statement at an earlier 

hearing where she said that the Administration wouldn’t extend 

the unemployment benefits for people because she thought that 

71

would encourage them not to seek work, or whether it’s because of 

their failure to fund No Child Left Behind, or attacks on worker 

safety, workers right to organize, or sleight of hand with the Medicare prescription drug bill and the history of this rule right on 

down the line. 

So there’s reason for skepticism, and people don’t mean to be attacking the witnesses. We mean to just fulfill our responsibility to 

try to find out exactly what this says. 

Ms. Smith, let me ask you a question about one particular section on this. It’s now called concurrent duties. It’s Section 541.106, 

and I think it used to be called the working foreman. It refers to 

the situation where employees have rank-and-file duties but also 

some level of managerial duties, usually supervisory or managerial 

in nature. 

The regulation essentially says an employee can be exempt as a 

supervisor even if the person also performs substantial nonexempt 

work, such as for a manager in a retail store, perhaps like the one 

Mr. Keller mentioned, or as a fast food establishment. The supervisor doesn’t lose the exempt status even if he or she performs 

work stocking shelves or running the cash register. Am I right on 

that interpretation, Ms. Smith? 

Ms. SMITH. That what? I didn’t hear the last part. 

Mr. TIERNEY. That he or she would not lose their exempt status 

even if they perform some work stocking shelves or running the 

cash register or normal duties. 

Ms. SMITH. Correct. 

Mr. TIERNEY. OK. Now the concurrent duties regulation isn’t limited to any particular industry as I read it. Do you read it the same 

way? 

Ms. SMITH. That it’s not specific to particular industries? 

Mr. TIERNEY. Right. 

Ms. SMITH. Right. They do give a couple of examples. But it will 

apply to all industries. 

Mr. TIERNEY. It used to be, as understand it, under the long duties test, that if a so-called manager spent more than 20 percent 

of time performing rank-and-file work, then that person would lose 

the exemption. But it appears that that’s no longer true, because 

they’ve eliminated the long duties test, right? 

Ms. SMITH. This is meant to mirror more or less the primary duties. They’ve added some. They’ve drawn some things from the long 

duties test into the primary duty, but not the specific criterion 

you’re looking for. That’s correct. 

Mr. TIERNEY. So it now it looks like the determination of whether 

it’s a primary duty is going to be made on a case-by-case basis. 

There’s no more bright line rule. And I guess it’s just going to be 

whether it’s a primary or a more important duty and somebody’s 

subjective analysis. Would that be your interpretation? 

Ms. SMITH. Primary duty is a subjective analysis, yes, because it 

doesn’t have to be a specific amount of time. 

Mr. TIERNEY. So it seems to me at least that that goes against 

the claim that the previous law was ambiguous and this one is 

going to be so much better. But if one person or an employee 

spends 75 percent of the time performing routine functions and 25 

72

percent of the time managing, then they must be nonexempt. But 

another person might conclude the other way. 

Ms. SMITH. Because it depends on their primary duty. 

Mr. TIERNEY. So smart employer, as opposed to a smart lawyer, 

may just decide this is the way they’re going to get around the law 

and then we’re going to be in all sorts of litigation. It seems not 

only subjective but a bit ambiguous. 

If we get back to that and we take it out of the Foot Locker business that Mr. Keller was talking about, what if we’re talking about 

a fire or police sergeant who performs regular police work but also 

does some supervisory work? He might be exempt despite the rank 

or the pay level. Am I right? 

Ms. SMITH. I think that those examples are—those are blue collar examples, and I think the focus of the Administration right now 

is on exempting white collar workers from overtime. I don’t think 

their focus is on exempting blue collar workers. I’m not saying it 

couldn’t have that effect. I think that’s possible. But I don’t think 

that’s where the Administration’s focus is right now. 

White collar workers are, as Mr. Bird has testified, and he knows 

more than I do about this, but white collar workers are expanding 

tremendously, and there are less blue collar workers today. And so 

I think what the Administration is saying is, we need to figure out 

a way where not all—this huge amount of white collar workers, 

they’re not all receiving overtime. 

Mr. TIERNEY. OK. I do think that whether this concurrent duty 

thing goes in, it’s so subjective that it could apply to this particular 

area as well as to a retail area. 

Ms. SMITH. Yes sir. Absolutely. They have removed the definition 

of working foreman. 

Mr. TIERNEY. And I guess my question is, if what the Secretary 

says is accurate, that they really did want to protect people who 

are now getting unemployment between $23,660 and $100,000, I 

don’t know what the resistance would be of just having a provision 

that says that all of those people for that job responsibilities would 

be exempt, would continue to be exempt, grandfathered in. And 

this wouldn’t make them for life no matter what they change for 

their job, but it would be their job as currently engaged in. 

Ms. SMITH. Concurrent duties is a very vague and subjective 

thing that’s going to be hard to deal with. The working foreman 

definition was much easier to deal with. We had much more examples, and it gave a 20 percent limitation which had nothing to do 

with long or short duties. That’s not there any more. 

Mr. TIERNEY. So, Mr. Norwood’s—

Mr. NORWOOD. Thank you very much. 

Mr. TIERNEY. Mr. Norwood’s smart lawyers will be busier yet. 

Thank you. 

Mr. NORWOOD. Thank you, Mr. Tierney. I recognize myself for 5 

minutes. Just a couple of thoughts. We’ve had enough time surely 

to look at this regulation. The AFL-CIO understood what was in 

it a week before it was issued, so surely we ought to know. 

Another thing, while my friend, Mr. Miller is here, and I wanted 

you to be here, I know you may work two or 3 days a week, and 

I congratulate you, but we should put in the record that most 

73

Members of Congress work six and 7 days a week, and I’m sorry 

that—

Mr. MILLER. Not in Washington, D.C. they don’t. 

Mr. NORWOOD. I’m sorry that the labor union wasn’t here who 

enjoyed your comment. But the fact is, most Members of Congress—I don’t know how you can get away with two or 3 days. But 

most Members of Congress work all week pretty hard. 

Mr. MILLER. Through Tuesday night at 6:30—

Mr. NORWOOD. Now let me—

Mr. MILLER.—3 o’clock in the afternoon—

Mr. NORWOOD. Mr. Miller, come on. 

Mr. MILLER.—6:30. 

Mr. NORWOOD. You are really out of line. 

Mr. MILLER. Well, you’re out of line with the comment. We go in 

to work at 2:30 on a Tuesday—

Mr. NORWOOD. I congratulate you on working two to 3 days a 

week. That’s what you said. 

Mr. MILLER. I know what I said. 

Mr. NORWOOD. Mr. Fortney, would you care to comment on primary duty? 

Mr. FORTNEY. Sure. Primary duty—

Mr. NORWOOD. And I wish Mr. Tierney were here to hear the 

other side. 

Mr. FORTNEY. Be pleased to. Primary duty is a part that exists 

under what we call the long test, and those of us that have suffered 

through these proceedings long enough have recognized that those 

are a set of tests or standards that in large part are not followed 

today. That is this percentage requirement, point one. So the reference to 20 percent I think suggest something that respectfully 

isn’t there, isn’t being followed. 

No. 2, the determination of 20 percent or any percent suggests 

that you’re to keep time records and do a host of other things that 

are directly inconsistent with having someone being exempt. And 

indeed, when there is a dispute, under the old rules, if I can call 

them that, the 20 percent, that’s exactly how that gets resolved. 

You have people come in with time motion and clipboards and 

they’re following what people are doing, following around. It’s very 

burdensome, very expensive. 

With all due respect, Ms. Smith, I do not think it provides a level 

of certainty. It creates a false illusion of certainty that simply 

doesn’t exist, and it doesn’t work well. 

The primary duty codifies the rules that are there. It does so in 

a way that it creates a standard that is more easily applicable to 

the wide range of jobs and well understood in the wide range of 

jobs that we have in the workplace today. 

Mr. NORWOOD. The Economic Policy Institute, they put out a 

briefing paper, and it was their belief that eight million workers 

would lose overtime pay. Mr. Bird, do you agree with that? 

Mr. BIRD. No. 

Mr. NORWOOD. Mr. Fortney, do you agree with that? 

Mr. FORTNEY. No. 

Mr. NORWOOD. Mr. Fortney, do you agree with that? Eight million workers? 

74

Mr. FORTNEY. That seemed very ambitious, and it’s a little outside. I’m not going to go into the numbers in detail, but that 

seemed—I was frankly stunned by that number. I read the report, 

and I couldn’t get the numbers to add up. 

Mr. NORWOOD. Ms. Smith, do you agree with that? 

Ms. SMITH. I’m not an economist. I don’t feel qualified to answer 

on economic questions about that kind of impact. 

Mr. NORWOOD. You were a footnote in that briefing paper as I 

recall. 

Ms. SMITH. Yes sir. 

Mr. NORWOOD. So you had input into that? 

Ms. SMITH. Yes. My part of that was to go through and look at 

the different job descriptions that were listed and say whether 

those job descriptions would have been exempt or nonexempt under 

the Fair Labor Standards Act at the time. 

Mr. NORWOOD. So you don’t agree or you don’t know if eight million workers—you don’t know whether eight million workers would 

lose overtime pay, according to this briefing paper put out by EPI? 

Ms. SMITH. Right. I did not do the economic analysis. That was 

not my part of that. 

Mr. NORWOOD. But you worked for EPI? 

Ms. SMITH. No, I do not work for the EPI. 

Mr. NORWOOD. Are you a consultant to EPI? 

Ms. SMITH. No. I was not a consultant. 

Mr. NORWOOD. They just called you up. Mr. Bird, you wanted to 

make further comment? 

Mr. BIRD. Yes. Thank you, sir. I am an economist, and I’m not 

a lawyer. I’m used to dealing with data and dealing with empirical 

facts. And I too was shocked by that analysis. I looked at it very 

carefully. 

That analysis was—that number of eight million and some odd 

was put forth in the context of the proposed regulation a year ago, 

not this final regulation, and it’s important to keep that in mind. 

It was wrong then. It is even more wrong now. It was based on 

jumping to conclusions about things for which there was no hard 

empirical fact. 

Mr. NORWOOD. Well, Mr. Bird, many people are using that briefing report as the Holy Bible. 

Mr. BIRD. And I found that to be a very frustrating aspect of 

much of the debate and discussion about this issue. The reality is 

that, you know, first of all, there are three sorts of jumping to conclusions going on here, all of which come out with very misleading 

results. 

First of all, I hear jumping to conclusions about how changes of 

a word here or there will change the decision of whether or not 

numbers of people are exempt or nonexempt. And the fact of the 

matter is, we do not have sufficient hard data, actual descriptions 

of the texture of people’s work, to be able to accurately and empirically say how a change in a phrase here or there will move millions 

of people one side or the other side of the line. 

Secondly, there’s being—we’re jumping to conclusions about 

whether or not becoming potentially qualified for an exemption will 

actually lead to a change in one’s pay basis or not. As I said in my 

opening statement and talk about more in the written testimony, 

75

there are millions of people who are clearly qualified for exemption 

who are working on a salaried basis and therefore earning overtime, not because their employer has neglected to take something 

from them, but because they and their employer have arrived at a 

mutual decision. 

And then finally, there is the jumping to the conclusion that even 

if a person’s status is changed from hourly to salaried, for whatever 

reason, that they will lose pay, when in fact the studies that we’ve 

seen looking carefully comparing people who do the same job and 

work the same hours, we find that regardless of whether you’re 

paid on a salaried basis or an hourly basis, you wind up making 

the same amount per week and per year for doing the same job 

from the same qualifications and the same basis. 

Mr. NORWOOD. Thank you, Mr. Bird. My time is well expired. 

Mr. Miller, you’re now recognized. 

Mr. MILLER. Thank you, Mr. Chairman. I appreciate you were all 

amazed and alarmed and whatever with the figure by EPI. But I 

think when you look at what’s transpired in the year since that 

came out, they’re closer to the mark than the Secretary’s 600,000 

impacted because you look at the dramatic rewrite of these regulations, it would suggest that they had included far more people to 

lose their overtime in the previous regulations than they were willing to tell the public at that time, or the regulations were simply 

that sloppily drawn that you could draw that number that’s a lot 

closer to EPI than it was to what the Secretary said. 

And as to the changing of a word, Mr. Bird, we all fight over the 

changing of a word because we know what it means to your clients 

and we know what it means to my constituents, and that’s what 

legislation is about. And it’s amazing. We pay people hundreds of 

thousands and millions of dollars in organizations to change a word 

here and change a word there. That’s the legislative process, because we know exactly very often what that impact is. 

Ms. Smith, let me ask you a question, if you might expand on 

page 493 for the rest of you. I’m looking at the question of the financial services industry and those people who will meet the administrative exemption. 

And the question there, one of the questions being raised by a 

number of organizations is the impact on people today as I understand who would be—would not be exempt because they’re engaged 

in sales, with this definition which picks up sales among other activities would, as it says there, provide for the administrative exemption. 

Ms. SMITH. Yes sir. Let’s say, as happened recently in our family, 

that I call a bank wanting to borrow money to remodel our home. 

I call the toll free number and speak with Ms. Jones and say I 

would like to apply for some type of loan. She asks some questions 

about my purpose and my financial situation, such as why I’m 

seeking the loan, how much I currently owe on my mortgage, what 

other outstanding debt I have, what savings I may have, et cetera. 

After completing the application, she tells me what products 

their company can offer and helps me decide such questions as 

whether I want to take a short-term loan or a long-term loan, perhaps convincing me that I should borrow more if the interest rate 

is favorable in order to pay off the car or student loan I mentioned 

76

in the initial questioning, and asked me if I would like to open a 

direct deposit account or credit card with the bank which could 

lower my percentage points. 

I have just described to you each aspect of what the Administrator has said is exempt. It says that work such as collecting and 

analyzing information regarding customer’s income, assets, investments or debts. That would be what she did when she asked me 

about my financial situation. 

Determining what financial products meet my needs. Do I want 

a short term or a long term? Do I want a home equity or an unsecured loan? 

Advising the customer regarding the advantages and disadvantages. Well, if you do this, you know, it’s a shorter term loan, but 

it’s a higher interest. 

And marketing service and you’re promoting, asking me if I want 

a credit card or to open a direct deposit account. 

I submit to you, Mr. Chairman and members, that what I’ve just 

described is the process of selling the company’s product, and that’s 

going to be exempt. 

In the very next sentence, it reads: However, an employee whose 

primary duty is selling financial products does not qualify for the 

administrative exemption. What is the process that I just described 

that the administrator would be exempt? It’s a selling process. 

And at the very least, I think that those who oppose the idea 

that this is a bad thing for employees could agree with me that this 

would at least be of confusion to employers and could encourage 

more litigation. 

Mr. MILLER. Well, I think again, earlier this morning I raised the 

point that when you now engage people in many aspects of the financial service industries, however you engage them, because of 

home mortgages or because of automobile loans or what have you, 

you very often now are engaging somebody who then has a series 

of questions for you. 

You can talk about whether or not your payment was received 

on time, and then they want to know, is there anything else can 

they do for you. Can they talk to you about, as I said, a home equity loan or this, that or the other thing. 

So the argument is that in the modern world, people are multitasking. These are the new jobs of the future. These are—somebody 

here said it. I think maybe it was you—said these are the production jobs of the future. In my district, huge numbers of people are 

engaged in this activity. Their primary worry right at the moment 

is that those jobs are going to be outsourced. But let’s assume that 

they hold onto those jobs for the moment. 

Your argument is that you’re marrying those tasks into a definition here that provides for the administrative exemption. Is that? 

Ms. SMITH. Yes. 

Mr. MILLER. I don’t want to put words in your mouth, but, I 

mean. 

Ms. SMITH. I think at least it would be accurate to say that we’re 

going to have to that—well, investigators. I was one of those. 

Mr. MILLER. I understand this is a gray area. 

Ms. SMITH. Right. 

77

Mr. MILLER. It’s not a question whether I’m all right or you’re 

all right or you’re all wrong or what have you. 

Ms. SMITH. Sure. 

Mr. MILLER. But the question is, I’m just trying to figure out 

what, you know, people are asking what this means to them. It 

seems to me that one of the things that’s happened here is you 

have aligned people within a definition. Some of those people 

weren’t there before. The job was more segregated than previously. 

If you wanted to take advantage of this exemption, you obviously 

would train people to multi-task both sales products, services, what 

have you, whether they’re on the road, off the road or, you know, 

because that’s in theory that the new world of work requires that 

people be able to do this, but it also feeds into the administrative 

exemption. I don’t know. I think Mr. Fortney would like to comment on that. 

Mr. FORTNEY. Could I just have maybe 20 seconds? 

Mr. MILLER. Sure. 

Mr. FORTNEY. I think perhaps—

Mr. MILLER. This isn’t a black or white game. 

Mr. FORTNEY. OK. Thank you. I think perhaps there’s some confusion as to, these points, the exchange that you’ve just had here 

I think is an interesting policy discussion. But going back to what 

the regs do and whether the regs are changing something. The answer is no, they are not. 

The regs—there are several court decisions that deal explicitly 

with where you draw this line, and those court decisions—I recognize you’re a lawyer, a practicing lawyer, the John Alden case, the 

Allstate Insurance case, that’s First Circuit, 11th Circuit, and a 

District Court case out of Georgia again involving Allstate Insurance. 

In those cases, the courts have recognized that employees can 

have a wide range of activities, exactly what Ms. Smith has described in her scenario, that properly can be deemed to be exempt. 

And the Labor Department has said, this is what we intend to do. 

We don’t—we’re not creating a new standard, we’re trying to write 

down what’s out there. 

Now there may be a different issue as to whether a different 

standard should be created, but I think the distinction is one that’s 

important. It’s not a take-away, it’s not a change. 

There is a court decision that I think does a good job of illustrating what is out there. When is inside sales really inside sales? 

That’s a case called Conseco, where it talks about your primary 

duty day to day being selling. But the courts have recognized, because they’ve had to struggle with these fairly vague rules the way 

they are, in these modern workplaces that you’re describing, where 

people are doing different functions. There is a certain level of, if 

you will, bleeding over into sales function that does not prevent the 

people from being properly classified as exempt. So with that, I 

hope that’s helpful. 

Mr. MILLER. And if you’ll be kind enough to give me 20 seconds, 

I would just say that as you’re bleeding over, you probably would 

not want to create a position of primary duties of selling financial—

you’d create a person that does more than that duty, who used to 

be recognized as inside sales. Ms. Smith? 

78

Ms. SMITH. I do not believe, as Mr. Fortney has suggested, that 

this is an interesting policy discussion. I believe that a wage and 

hour investigator will have to look at this regulation and decide exemption and nonexemption, and I believe that they would have decided that employees were nonexempt when they were conducting 

inside sales activities, and now they’re going to decide that those 

employees are exempt. 

I believe here we have a large group of employees who will lose 

exempt status. They will lose their overtime. This is not just an interesting policy discussion. 

And I do also think we’re talking about clarity here. The Administration said repeatedly that they’d like to have a clearer law, one 

that lets employers know what their obligations are. This is not it. 

Chairman BOEHNER. [Presiding] The Chair recognizes the 

gentlelady from Illinois, Ms. Biggert. 

Mrs. BIGGERT. Thank you, Mr. Chairman. Mr. Fortney, following 

up on this, that Ms. Smith just claimed that an employee who 

calls, solicits information about a customer’s financial status and 

sells a customer a loan product she thinks would be exempt. But 

doesn’t the rule explicitly provide that an employee whose primary 

duty is sales is entitled to overtime? Or do you share Ms. Smith’s—

Mr. FORTNEY. No, no, no. And this goes back. If the primary duty 

is sales, and we’ve talked earlier about you can do additional duty. 

If your primary duty is sales, you get overtime. That’s the rule 

today. That’s the rule under the final regulations that will be implemented. 

Mrs. BIGGERT. So do you agree that this is going to be something 

that is not clear now at the time, for somebody like inside sales? 

Mr. FORTNEY. No. Frankly, with all due respect, I think this is 

something that’s much clearer now because in two or three fairly 

succinct sentences, I think the Labor Department has done a very 

fair job of summarizing the case law that’s out there today. And as 

I mentioned earlier, that allows a business owner and an employee 

to go read the regulation, a couple or three sentences, get a sense 

as to what the rule is, as well as the Labor Department when it 

comes to enforcing it. 

Mrs. BIGGERT. OK. Thank you. Then your testimony suggests 

that changes to regulations governing computer employees and outside sales employees are largely administrative and do not make 

any substantive changes to the current law. I believe that Ms. 

Smith seems to suggest otherwise. 

Can you expand on your testimony on these points, and do you 

share Ms. Smith’s assessment of these regulations? 

Mr. FORTNEY. Yes. With regard to computer employees, there’s 

been some discussion of that. What the regulations do is codify in 

the regulations the language that was used in the 1996 amendment enacted by Congress. And I think that frankly, had the Labor 

Department steered away from that, I think that Congress would 

rightfully be upset and probably be all over them. 

So I’m not sure they had a whole lot of running room on that, 

and I think if you uphold the law, the statue enacted by Congress 

and you look at the reg, it’s the same thing. So I don’t think there 

is a change. I think that’s what it’s now in the reg clearly. 

79

With respect to the outside sales, there was a 20 percent rule. 

The Labor Department has adopted, and there’s been some earlier 

discussion about the primary duty. And that’s still the case. The 

Labor Department also has helped us understand what happens in 

the real world today with outside sales; that they’re not just selling. They’re doing a variety of other functions. And I do believe, although—is there room for improvement? I suppose, but it’s a lot 

better than what we have, and the line is much easier to understand than the rather mechanical 20 percent. That suggests an artificial level of precision, and in the world, it just doesn’t work like 

that. 

Mrs. BIGGERT. Thank you. And one last question. How do the 

final regulations affect employees who may actually own some 

share or hold an investment in their company? 

Mr. FORTNEY. Yes. I’m sorry. There is a specific provision that 

deals with the 20 percent ownership. And there was criticism in 

the proposal as to whether the standards were too loose. 

Essentially, what the final regs do, they tighten it and say that 

the person can be exempt; that is, not get overtime. But they still 

have to perform, you know, have a bona fide job there, be performing duties, exempt duties in a fashion. So it does permit that. 

Mrs. BIGGERT. So that means that let’s say a telephone operator 

at IBM owns 50 shares of stock in the corporation, that she’s not 

exempt from overtime? 

Mr. FORTNEY. We’re not talking about, with all due respect to the 

operator that owns 50 shares of IBM, no. Because they would not 

meet the requirement, the ownership requirement. It’s very high. 

What we’re really talking about are typically fairly small businesses, often family run businesses, closely held businesses where 

people have that type of ownership. 

Mrs. BIGGERT. OK. And then what—how does that compare to 

current law? What’s the current law right now on that? Is there a 

change? 

Mr. FORTNEY. There’s not. Again, there is not—I sound perhaps 

like a broken record, but there is not a change. It’s concise, it’s precise, but it’s not substantively different. 

Mrs. BIGGERT. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Chairman BOEHNER. Let me thank our witnesses for your valuable time and your testimony. And for the benefit of our members, 

it should be obvious that, as this hearing comes to a close, that trying to determine exempt or nonexempt status is not an exact 

science. And having run a business, having traveled the country, 

there are every imaginable kind of business, every imaginable type 

of job, and the new rules I think will bring more clarity to the 

workplace for both employers and employees than what we’ve been 

working under over the last several decades. 

But the reason that we have investigators, such as Ms. Smith 

used to be, to go out and try to make these determinations and to 

have enough clarity in the regulation to give them the kind of 

background and basis for making a determination about a particular job. Is it going to be perfect? No. Is it a lot better than it 

was? Absolutely. And I think that both employers and employees 

80

will be very happy having more certainty about what to expect in 

these regulations. 

And with that, the hearing is adjourned. 

[Whereupon, at 1:45 p.m., the Committee was adjourned.] 

[Additional material submitted for the record follows:]

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U.S. Department of Labor, Fair Pay Facts, Overtime Security for the 21st 

Century Workforce, ‘‘AFL–CIO Distortions Harm Workers’’


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U.S. Chamber of Commerce, Letter to Chairman John Boehner, April 28, 

2004


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U.S. Chamber of Commerce, Press Release, ‘‘Chamber Welcomes White–

Collar Overtime Reform’’, April 20, 2004


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National Council of Chain Restaurants, of the National Retail Federation, 

News Release, ‘‘NCCR Welcomes Updated Overtime Rules’’, April 20, 2004


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National Association of Mortgage Brokers, Press Release, ‘‘Mortgage 

Brokers Applaud DOL Overtime Regulations’’, April 22, 2004


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American Bankers Association (ABA), News Release, ‘‘ABA Statement on 

Labor Department Final Overtime Rule’’, April 20, 2004


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Retail Industry Leaders Association (RILA), RILA News, ‘‘Retail Industry 

Leaders Association Applauds Release of New Overtime Regulations’’, 

April 20, 2004


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Associated Builders and Contractors, Inc., (ABC), News Release, ‘‘ABC Applauds Labor Department Effort to Revise Outdated Rules Under Fair 

Labor Standards Act’’, April 20, 2004


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Society for Human Resource Management (SHRM), PR Newswire, ‘‘New 

White–Collar Exemption Rules Expected to Bring Clarity to Workplace’’, 

April 20, 2004


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Heritage Foundation, WebMemo 485,’’The New Overtime Regulations: 

Clearer Rules, Fewer Conflicts’’, April 20, 2004


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Food Marketing Institute (FMI), Press Release, ‘‘Food Retailers and Wholesalers Applaud DOL for Rewriting Overtime Rules for the 21st Century 

Economy’’ April 20, 2004


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National Federation of Independent Business (NFIB), News, ‘‘NFIB: DOL 

Overtime Rule Offers Clarity for Small Business’’, April 20, 2004


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American Insurance Association (AIA), Press Release, ‘‘AIA Praises New 

Labor Regulations’’, April 20, 2004


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Mortgage Bankers Association (MBA), Statement by Kurt Pfotenhauer, Senior Vice President of Government Affairs, ‘‘MBA Applauds Department of 

Labor for Modernizing the Fair Labor Standards Act’’, April 20, 2004


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National Restaurant Association, Press Release, ‘‘National Restaurant Association Recognizes Labor Department’s Modernization of Overtime Regulations’’, April 20, 2004


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National Association of Manufacturers (NAM), Press Release, ‘‘NAM Welcomes Labor Dept. Announcement of Update of Nation’s Antiquated Overtime Regulations’’, April 20, 2004


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Americans for Tax Reform (ATR), News, ‘‘Labor Department Announces 

New Rule to Clarify 50–Year Old Regulations and Increase Overtime Pay 

for Millions of Workers’’, April 20, 2004


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National Association of Convenience Stores (NACS), Press Release, ‘‘Convenience Store Industry Commends Labor Department’s Efforts on ‘Fair 

Pay’ Overtime Initiative Under FLSA’’, April 20, 2004


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National Retail Federation (NRF), News Release, ‘‘Retailers Welcome New 

Overtime Regulations’’, April 20, 2004


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Statement of Cheryl Johnson, RN, President, United American Nurses, 

AFL–CIO (UAN), April 28, 2004


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Æ


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