Vol. 45, No. 12
In today's tough labor market, employers are using mandatory overtime -- but employees increasingly resist. Can HR help make overtime more palatable?
As human resource managers know by now, a strong economy can be too much of a good thing. It’s hard to find and keep experienced employees. And it’s getting tougher to make them work overtime.
The decision to use mandatory overtime doesn’t necessarily fall to HR. But if you do need a policy, you can work with top managers, supervisors and employees to create an overtime structure that is fair, consistent and considerate of employees’ needs. Making forced overtime easier to bear helps avoid the poor morale, absenteeism and other problems caused by too many extra hours on the job.
“HR people have to recognize that mandatory overtime has become a hot-button issue,” says Michael J. Ossip, an employment attorney at Morgan, Lewis & Bockius LLP, a Philadelphia law firm. “Although the employer has a legal right to order mandatory overtime and discipline employees who refuse, employers also face an increasingly competitive labor market” in which employees unhappy about overtime simply can walk away.
How can you avoid antagonizing or driving away the very employees you need? Experts advise making overtime as predictable as possible and giving workers a say in how it’s assigned.
The Overtime Clash
Whether they want to or not, many employees are working more than the standard 40-hour week. Blame the economy; the longest expansion in recent U.S. history has put almost everyone to work. It’s hard for employers to fill full-time positions, yet they need extra help to meet surges in demand for products and services.
In manufacturing, the only industry for which the U.S. Bureau of Labor Statistics (BLS) tracks overtime, employees worked an average of 4.5 extra hours in August, an increase from 3.7 hours in August 1989, and 3.2 hours in August 1979.
The portion of all wage and salaried workers who worked at least 49 hours per week rose slightly between 1994 and 1999, from 18 percent to 19 percent, the BLS says.
“Employers are stuck between a rock and a hard spot,” notes John Challenger, CEO of Challenger, Gray & Christmas, a Chicago outplacement and consulting firm. “They’re having a hard time replacing people, but they’re also facing extreme pressure from employees [who resist overtime].”
The options for employers are to hire additional workers, use temporaries or rely on overtime, says Dick Toikka, chief economist at the Washington, D.C.-based Employment Policies Institute, which studies entry-level employment issues.
Overtime is becoming increasingly popular, he adds, because it allows employers to fill labor gaps without the disruptive hire-and-fire pattern used in past years as the economy cycled up and down.
For some hourly workers, overtime is a good way to make extra money. For others, it’s part of the corporate culture. But for many more, it’s just plain unwanted, even at the time-and-a-half pay required for more than 40 hours of weekly work. With many employees already earning more in a strong economy, some workers would rather have time off than extra money.
“Premium pay has lost its power as an incentive” to work overtime, says John Fraser, deputy administrator of the U.S. Department of Labor’s Wage and Hour Division in Washington, D.C.
Labor advocates contend that overtime is an excuse to avoid hiring new workers and that paying workers time-and-a-half costs employers less than paying for the training and benefits of new hires.
“It’s an attempt on the part of employers to get off on the cheap by not hiring additional staff. It’s another way of squeezing more out of less,” says Ray Abernathy, president of Anderson/Abernathy, a labor consulting firm in Washington, D.C. “I think it’s terribly short-sighted because it’s causing more problems than it’s worth.”
For workers, those problems include stress, absenteeism, tardiness, injuries and less time for family and other personal pursuits. Especially irksome, employee advocates say, is short notice for overtime, which can leave workers scrambling for day care or canceling social engagements.
“One thing that really upsets people is they can’t plan their lives,” says Rick Bank, director of the AFL-CIO’s Center for Collective Bargaining in Washington, D.C.
For employers, overtime-related problems include workers who become tired, less productive and prone to accidents and mistakes. “Workers may be there for 12 hours, but that doesn’t mean they’ve been productive for 12 hours,” notes Beverly J. Bailey, principal of Bailey Strategic Human Resources, an HR consulting firm in Diamond Bar, Calif.
The safety of workers doing extensive overtime got attention when a power company lineman in Maine died earlier this year. After working for almost 24 hours straight, he climbed a utility pole and touched a cable without following the usual precaution of putting on gloves that might have saved his life. His death, blamed by some on fatigue caused by overtime, helped spur Maine’s legislature to pass a law capping overtime hours. (See “States Eye Overtime Curbs,” page 88.)
Employers that use mandatory overtime too much or too unpredictably risk a nasty backlash of poor morale, outright rebellion and departures. When the workplace is unionized, the employer also may risk strikes over overtime policies. In businesses ranging from health care to telecommunications to wholesale foods, overtime was at the heart of recent labor disputes.
Employers’ Rights and Limits
Even where union contracts are in place, employers generally have wide leeway to order overtime. The Fair Labor Standards Act of 1938 governs overtime pay but doesn’t limit the number of hours employees can work. “The norm in the U.S. economy is at-will employment. The employer can require employees to work. If they refuse, they can be fired,” says Toikka.
A few states do set caps on hours for some occupations. Union contracts also may cap mandatory overtime, although most contracts don’t have such provisions, Abernathy says. However, perceived abuses are leading more unions to make overtime an issue at the bargaining table.
Whether mandatory overtime is governed by company policy or union contract, firms must decide whether and how to limit the number of overtime hours and how to choose who works overtime.
In union settings, contract language may limit the number of overtime hours worked in a day or week and require double- or triple-time pay for overtime work, Bank says. Provisions requiring employers to notify workers hours or even days ahead of time of the need for overtime also are becoming common in contracts.
“Most companies fight hard not to have limits because they believe they need operational flexibility,” Bank says. But, “No matter how much money you’re making, you want to have a life.”
As for who is first in line for overtime work, some contracts give the option to senior employees, others to junior ones. There’s usually a system that ensures overtime is equitably distributed so that the burden doesn’t fall too often on any one employee, Ossip says.
Potomac Electric Power Co. (PEPCO) uses a carrot-and-stick approach to assign overtime to union members during storm-related emergencies as well as routinely, says Bill Wolverton, manager of HR and strategic planning for the Washington, D.C.-based utility.
Under the PEPCO union’s contract, workers who volunteer for overtime are called first and paid a higher overtime rate than employees who don’t volunteer. Next in line are those who have most frequently declined to work overtime in the past. They are paid a lower overtime rate. “If you sign up [for overtime], you get the best economic treatment,” including a quarterly bonus, Wolverton notes.
In addition, shifts are capped at 16 hours per day, with at least eight hours off between shifts, says PEPCO spokeswoman Nancy Moses. These terms, contained in an agreement between PEPCO and the International Brotherhood of Electrical Workers Local 1900, cover about 1,500 of the company’s 3,600 employees, she adds.
In the health care industry, hospital nurses have made mandatory overtime a key point at the bargaining table. “It’s been an issue in every contract negotiated in the past 12 months,” says Susan Bianchi-Sand, director of United American Nurses, the collective-bargaining arm of the American Nurses Association (ANA).
Contracts that ban mandatory overtime are rare, although they exist at Lima Memorial Hospital in Lima, Ohio, and at New York’s Mount Sinai Hospital, according to the ANA’s web site. More typically, contracts limit how often mandatory overtime can be imposed and cap the total number of hours nurses can work during a day. In some cases, nurses can refuse to work overtime if they believe they are too tired or too sick to work safely.
What HR Can Do
Experts say that when it comes to overtime policy, employers operating without unions generally have more flexibility than employers with unions. But the issues are the same:
Should you limit the frequency and number of overtime hours?
Should you limit the number of consecutive days people can work overtime?
Should you ask for volunteers first or use some other system? The bottom line for HR is to ensure fairness and, if possible, predictability.
“It’s important you’re consistent in dividing up the overtime” so that some employees are not inconvenienced more than others, Bailey says. “You want to be fair and equitable. That may mean it’s not a popular decision.” She suggests asking for volunteers first.
It’s also important to give employees as much notice as possible of the need to work overtime, which gives them time to arrange day care and make other plans.
Good communications also help workers know what to expect. Challenger says that HR managers should tell employees why overtime is needed and how long it is expected to last. Management should tell employees the steps it is taking to solve labor shortages that create overtime needs, he notes. And the employer can notify employees about overtime policies during job interviews and in employee handbooks.
Wolverton says that PEPCO and union officials held joint meetings with employees for months to explain and get feedback on a proposed overtime policy before it was formally approved by employees. Hiking pay, increasing overtime premium pay and allowing people to sign up for overtime a day at a time—rather than a week at a time, as originally proposed—helped sell the policy, he says.
“Were they dancing in the streets over this? I don’t think so. But I do think it’s a fair agreement,” Wolverton says.
Finally, HR should try to involve workers in setting policy. That’s the approach taken at Maine Medical Center, a 5,000-employee health care system in Portland. The nonunion employer tries to avoid mandatory overtime by using an in-house pool of temporary nurses, but when necessary, individual nursing units set their own polices, says Paula Squires, vice president of HR.
“Not everyone’s always thrilled with [overtime], but they understand we need the coverage,” she says. “One size doesn’t fit all. I promote having different policies in place.”
Taking Disciplinary Action
What if an employee refuses to work mandatory overtime? At-will employers can fire such workers, but that’s an extreme step, HR experts say. Instead, many firms and union contracts call for a graduated disciplinary system that begins with verbal and written warnings.
It’s a good idea for the employer to put in writing what it will consider valid reasons for refusing to work overtime, Challenger says. But the employer must apply that policy consistently. “If exceptions are granted and people feel they’re not appropriate, the whole program may break down,” he adds.
Employers also have to be careful not to force mandatory overtime on an employee who might be unable to work the overtime due to leave requirements of certain federal laws. For example, Ossip said, employers might hit legal trouble if they order overtime for an employee who cares for a sick relative, under coverage provided by the Family and Medical Leave Act, or an employee who must leave for a medical appointment and who has a condition covered by the Americans with Disabilities Act.
For more information on overtime policies, visit the HR Magazine section of SHRM Online at www.shrm.org.
Carolyn Hirschman is a business writer based in Rockville, Md. She has written for a variety of business publications and has covered workplace issues since 1991.