Employers Welcome Overtime Reform: Changes Make Work Rules Clearer

For the first time in 50 years, the Department of Labor has reformed overtime regulations to reflect the modern workplace and help employers determine which white-collar workers are eligible for overtime. The changes will also help put an end to frivolous lawsuits faced by small businesses.

"These reforms provide clearer guidance to both employers and workers about their rights and responsibilities under wage and labor laws," says Michael Eastman, director of labor policy for the U.S. Chamber of Commerce. "They also address many of the fundamental problems in the previous, outdated regulations that led to numerous compliance questions and needless lawsuits."

Since 1954, America's overtime regulations have not significantly changed, making the regulations obsolete and the source of a great deal of costly litigation. According to the Administrative Office of the U.S. Courts, class action litigation on wage and hour laws has grown by 230% since 1997 alone.

Under the former overtime rules, small businesses were vulnerable to frivolous lawsuits from trial lawyers looking to take advantage of ambiguity in the labor laws to land outrageous settlements for highly skilled and highly paid white-collar workers. Outdated classifications meant that certain fields of high-tech workers could claim a legal right to overtime pay.

"For 25 years, every administration has made reform of these regulations a priority, but none has been successful until now," Eastman says. "Secretary Chao and the Labor Department are to be commended for completing these important reforms."

While the U.S. Chamber favored the Department of Labor's revisions, the final changes do not go as far as the Chamber would have liked. In particular, they fail to set a bright-line test excluding highly paid employees.