The Bush administration proposed new wage and hour regulations yesterday that it said would increase the number of low-wage workers who qualify for overtime pay, but cut the number of higher-paid, white-collar workers who qualify.
Labor Department officials estimated that the proposals, which face a 90-day comment and review period, would add 1.3 million low-paid workers to the group that automatically qualifies for overtime pay. The rules would exempt an additional 640,000 executive, administrative and professional workers from qualifying when they work more than 40 hours a week.
The proposed regulations would alter the criteria for determining which white-collar employees cannot receive overtime and would make it considerably harder for workers earning more than $65,000 a year to qualify for overtime.
Under the existing regulations, which have not been updated since 1975, assistant managers of fast-food restaurants earning $18,000 a year often do not qualify for overtime because they are considered managers. Under the new rules, anyone earning less than $22,100 a year would automatically qualify for overtime, a significant change from the existing rules, under which only workers earning less than $8,060 a year automatically qualify for overtime.
"Reform of these regulations is absolutely necessary in order to strengthen overtime protection for low-wage workers," said Tammy D. McCutchen, administrator of the wage and hour division at the Labor Department.
Department officials said 24.8 percent of the additional workers who would automatically qualify for overtime under the new rules are Hispanic and 54.7 percent are women.
Bush administration officials said the proposals sought to simplify and modernize regulations under the Fair Labor Standards Act of 1938. Business groups generally praised the proposed regulations, while labor unions harshly criticized them, saying they would help employers by exempting large groups of white-collar workers from receiving time-and-a-half for overtime.
Union leaders applauded the expanded overtime coverage for low-wage workers, but predicted that the additional white-collar workers exempted from overtime would far exceed the 640,000 predicted by the Labor Department.
"It's an absolute disaster for white-collar workers who deserve protection under these regulations," said Nick Clark, senior assistant general counsel with the United Food and Commercial Workers Union. "It's going to gut protections for many workers in the military, airlines, energy, financial securities and health care industries."
Under current regulations, about 70 million workers qualify for overtime because of automatic provisions or because their jobs are not considered exempt executive, administrative or professional ones. Traditionally, workers who are considered managers, high-level administrators or highly skilled professionals have been exempted from overtime coverage.
To determine whether an administrative employee is exempt from overtime, the Labor Department's proposal drops the longtime test of whether the worker customarily and regularly exercises discretion and independent judgment. Instead, the test would become whether the worker holds a "position of responsibility," defined as performing work of substantial importance or performing work requiring a high level of skill or training.
Like the existing test, the proposed test for administrative workers would also weigh whether their primary duty is to perform office or nonmanual work directly related to the management or general business operations of their employer.
Under the old rules, executive employees were exempt if they met the test of using discretionary powers and did not devote more than 20 percent of their time - or 40 percent in retail and service establishments - to activities not closely related to exempt work.
Under the new proposals, an executive employee would be exempt if three criteria were met: the worker's primary duty is the management of the enterprise or a department or subdivision, the worker regularly directs the work of two or more other employees, and the employee has the authority to hire or fire or recommend hiring and firing other employees.
If a nonmanual worker earns more than $65,000 a year, however, only one of the criteria must be met, making it easier for employers to exempt higher-paid employees.
For professional employees, the proposed test is whether the worker's primary duty requires advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. Under the existing rules, that instruction generally meant college or graduate school, but the proposed rules state the instruction could also include military duty, technical schools or work experience.
Randel K. Johnson, vice president for labor policy at the United States Chamber of Commerce, said the proposed regulations - 13,000 words, down from the existing 31,000 - should help slow the flood of class-action lawsuits in which many higher-paid workers assert that they were wrongly denied overtime.
"We think they're on the right track simplifying some of these tests," Mr. Johnson said. "We're encouraged by the fact that they set an upper-level salary test with a simplified duties test."
Ms. McCutchen said the proposed regulations would not affect workers who qualify for overtime under union contracts.