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“INTRODUCTION OF THE WORKER ECONOMIC OPPORTUNITY ACT” mentioning the U.S. Dept of Labor was published in the Extensions of Remarks section on pages E455 on March 30, 2000.
The publication is reproduced in full below:
INTRODUCTION OF THE WORKER ECONOMIC OPPORTUNITY ACT
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HON. CASS BALLENGER
of north carolina
in the house of representatives
Wednesday, March 29, 2000
Mr. BALLENGER. Mr. Speaker, today I am pleased to join Senator McConnell and others in the introduction of ``The Worker Economic Opportunity Act,'' a bipartisan bill to protect stock option programs for rank-and-file employees. In a February 12, 1999, opinion letter that has only recently become widely publicized, the Department of Labor determined that under the 1938 Fair Labor Standards Act, at least in some case, the profits from the exercise of stock options are part of an employee's ``regular rate'' of pay, and therefore must be taken into account in determining the employee's overtime rate of pay.
While the opinion letter constitutes the agency's interpretation of the law based on the facts and circumstances of one particular case, the practical effect of the letter is to ``red flag'' other similar programs and cause widespread confusion about overtime liability among employers who provide stock options for their hourly or ``nonexempt'' employees.
Stock option programs can be configured in a variety of ways and are referred to by different names, but all of the programs share similar objectives: to reward employees, provide ownership in the company, and to attract and retain a motivated work force. In testimony before the Subcommittee on Workforce Protections' hearing earlier this month, witnesses discussed how stock ownership programs are now available to more and more employees. In the past, such programs were used to reward executives, top management, and other key employees. However, there has been a dramatic increase in the past several years in the number of companies offering broad-based employee ownership plans to rank and file employees.
A 1998 study by Hewitt & Associates found that over 66 percent of the companies surveyed gave options to some portion of their nonexecutive workforce. The National Center for Employee Ownership estimates that more than 6 million nonexecutives receive stock options. In the high-
technology industry, some 55 percent of rank-and-file employees participate in employee ownership programs.
I daresay that few employees who receive stock options from their employer consider the profit on those options to be part of their regular rate of pay for overtime purposes. Yet the Department of Labor's interpretation of the law that says stock options may be part of the employee's ``regular rate,'' threatens to undermine the ability and the willingness of employers to make stock options available to their ``nonexempt'' employees. Ms. Abigail Rosa, an employee who testified at the hearing, expressed concern that DOL's interpretation of the law would force companies to do away with stock option programs for employees who are covered by overtime.
The Worker Economic Opportunity Act would amend the Fair Labor Standards Act (FLSA) to ensure that federal law does not end up discouraging the use of such programs or denying employee the opportunity to participate in the success of their company. The bill specifies that any value or income derived from a stock option, stock appreciation right or employee stock purchase plan would be exempt from an employee's regular rate of pay for the purposes of calculating overtime. Plans must meet the following requirements: a minimum 6-month vesting period between the grant of the option and its exercise by the employee; any discounts on stock option or stock appreciation rights may not exceed 15 percent of fair market value at the time of the grant; the voluntary exercise of any grant or right by the employee; and disclosure of the terms of the plan to employees.
Employers may grant options based on employees' past performance, provided that the options are not pursuant to any prior contract. In addition, employers may grant options based on the future performance of any size facility, or a business unit or group consisting of at least 10 employees.
Under the bill, employers who are currently operating plans would be protected from liability for overtime back pay if: the grants or rights were obtained prior to the bill's effective date; the grants or rights were issued to employees within a year after the bill's effective date under plans that must be modified through shareholder approval; or the plans are part of a collective bargaining agreement as of the bill's effective date. Finally, the provisions of the bill would go into effect 90 days after the date of enactment, giving employers time to complete pending grants.
Mr. Speaker, this bill represents the hard work and attention of many Senators and Members of the House on both sides of the aisle, as well as the Department of Labor. I urge my colleagues to support the legislation.
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