Cutting OT Costs

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The U.S. Department of Labor is suggesting ways to keep employers' overtime costs from going up. In an AP story, U.S. Offers Tips on Cutting OT Costs, released this morning, the Labor Department offered tips such as cutting hourly wages and adding in the overtime pay to create an amount equal to the original salary, or raising salaries to $22,100 annually to make employees ineligible for overtime, among others.

Doesn't seem quite fair. Hourly workers often find themselves working overtime to earn needed cash. But employers who have suffered costly lawsuits in response to worker litigation accusing them of withholding overtime pay have another story to tell. Former Inc. writer Chris Caggiano broached the topic in "Are You Cheating Your Employees?" in a February 2003 article. In it he noted the rising incidence of lawsuits and the difficulty many small-business owners have when trying to comply with the antiquated Fair Labor Standards Act (it was first enacted in 1938). Caggiano said that the FLSA is often confusing for business owners and easy to misinterpret. He also quoted a DOL administrator saying, "Even our investigators have trouble applying the rules."

So what's to be done with an act that no one really understands? The new regulations proposed last March would help by clarifying the definition of exempt employees and modifying the salary basis test, but if enacted this March, will they be enough?