While members of Congress and countless Americans enjoy their summer vacations between now and Labor Day, there lies a huge piece of unfinished business on the Congressional agenda–one that could make the summer for those average Americans much less enjoyable after August 23.  Congress has adjourned for its traditional summer recess without doing anything to prevent new overtime regulations from going into effect in late August.  A couple of recent studies now confirm what was already anticipated:  that more workers will be harmed than helped by the changes.  And while a number of U.S. businesses may not yet be geared up to transform the way they pay their workers, especially with the political outcome still in doubt, some workers will undoubtedly see changes before Labor Day.  It’s not too late for Congress to fix the problem when it resumes in September, but it certainly makes a already messy situation even messier.

It’s always a challenge to pass legislation in an election year, especially when one or both parties has a particular ax to grind.  Neither side wants the other to score any points that could be used to leverage that party or candidate’s position in November.   This issue has been particularly polarized.  Most Republicans (but not all) support the business interests who want to see changes to the overtime regulations, and support the Administration’s proposal.  Most Democrats (but not all) support the position of workers who mostly stand to lose ground when these changes go into effect, and have thus opposed the proposal.  Right now in Congress, if one takes a head count, there are more who oppose the changes than support them.  Unfortunately, those who oppose the changes are not part of the leadership in either the House or Senate, so it has been relatively easy thus far to stall efforts to block the new regulations from going into effect.

Because the rules are so complex, and there were changes in the final text when it was released, it has taken a while for worker-friendly advocates to analyze their full impact.  (See April 20, 2004 blog entry, with kudos to NELA for the role of its commentary in bringing about some changes.)  In mid-July, the Economic Policy Institute, a leading foe of the proposed changes, issued its long-awaited analysis.  The Department of Labor claims that 6.7 million workers will have their overtime protection strengthened by the law, including 1.3 million low-wage workers who were denied overtime under the old rules.  (See DOL’s FairPay page.)  However, EPI’s research strongly challenges that assertion, instead claiming that 6 million workers will lose the ability to collect overtime, while only 400,000 who don’t currently collect overtime will be newly eligible.  (See Longer Hours, Less Pay.)   

Those who are nominally considered “supervisors” are at most risk for losing overtime.  According to Eisenbrey,

Changes in the primary duty test and the redefinition of “executive” will allow employers to deny overtime pay to workers who do very little supervision and a great deal of manual or routine work, including employees in factories and industrial plants. Employees who can only recommend—but not carry out—the “change of status” of the two employees that they “supervise” will be exempted as “executives” even if they manage nothing more substantial than a team or grouping of employees.

Also at risk are those without advanced degrees, or even those without college degrees, who nonetheless run the risk of being considered “professionals,” based solely on their on-the-job training.  Workers in this category include computer programmers, chefs and sous chefs, and funeral directors and embalmers, all of whom enjoy more protection under current law.   Eisenbrey sums up the proposed changes by calling them an “abomination” and saying “It’s the worst rollback in employee rights in 57 years,” referring to the passage of the Taft-Hartley Act in 1947, a bill that put some limitations on trade union activities.

The AFL-CIO, also very active in this fight, has produced a report which indicates by region where overtime will be lost, so that workers can see which areas of the country are likely to be hardest hit.  (See AFL-CIO Chart.)  The AFL-CIO has also commissioned a study by several  former Labor Department officials, who worked under both Republican and Democratic regimes, to evaluate the new rules. The study’s author’s claim that the proposed regualations 

“failed to restore” an appropriate salary level requirement, and failed to establish “reasonable and clear criteria” for determining those not able to claim overtime, including executives, administrators, professionals, and outside sales employees. The rules could result in a “profusion” of court litigation.  Worst of all, the three held that the department in its rules “failed to protect and promote the interests of working people,” a “core” mission of the DOL.

(See Christian Science Monitor article.) 

When confronted with the EPI and AFL-CIO reports, the Department of Labor’s response has been to deny its accuracy.  Ed Frank, DOL spokesman, responds that “This is a last-ditch effort to restart the misinformation campaign that has failed to cover up the fact that millions of workers will benefit from the Labor Department’s strong new overtime guarantees.”  (See CBS MarketWatch article.)  The disputes about who will benefit and who will be harmed are certain to continue over the next several months and years, if the new overtime regulations remain in effect for any significant period of time.  It is indisputable some workers will benefit from the new “salary” test–the question is merely how many.  The old test of $155 a week has been in place since 1975, and so an increase was clearly warranted.  However, it is also unclear whether there are really that many employees making less than the new standard or $455 a week who are currently considered exempt by their employers, so it’s not enough to simply count the number of employees who make between $155 and $455 a week and consider them newly protected. 

Time is currently on the side of workers, but that time is running out.  One lawyer, Lawrence Lorber, claims “the notion that anyone is going to be fully compliant is impossible.” Lorber says there are many companies that still won’t be meeting the new rules in 2006. (See Washington Post article.)  A recent survey by Hewitt Associates indicates that 20 percent of 150 companies interviewed said they did not expect to be able to meet the Aug. 23 deadline for compliance. An additonal twenty-three percent said they would be ready, but only as a result of focusing additional resources on the effort to be in compliance.  Some firms are not planning to make significant changes, either because they plan for competitive reasons to stick with current law where it favors workers, or because they already pay overtime for those in the lowest paid jobs who might stand to benefit.   One Georgia hospital, which would be allowed to change overtime pay for some nurses, is not planning to do so.  “First of all, it’s the right thing to do when our nurses work more than 40 hours a week on our behalf,” says administrator Scott Cantley. “Second, it’s the competitive thing to do. The other hospitals in our region also do the exact same thing.”  (See Marietta Times article.)

While this “wait and see” approach may favor workers in the short term, it will not last forever, especially if Congress fails to act soon.  In the Senate version of the JOBS bill (which also contains a provision concerning taxation of damage awards) there is an amendment which would prevent the new provisions from going into effect.  It’s unclear what will happen to this provision in a House/Senate conference, especially in an election year.  (See Christian Science Monitor article.)  What’s clear, however, is that even though members of Congress are on vacation (or most likely campaigning or attending the respective political conventions), workers can’t take a break right now.  Congress needs to continue to hear from you, so that staffers have piles and piles of letters opposed to overtime reform ready for their bosses after Labor Day.  Otherwise, the changes will go into effect, businesses will figure out how to pay their workers the least amounts that are legally permissible , and workers throughout the country will be spending less time with their families, and will have less money to spend on their families.

Take Action Now:  Protect Your Right to Overtime Pay

The noise undoubtedly has reverberated up and down Wall Street, if not throughout the country, after a $54 million settlement was reached yesterday in Manhattan, just before trial was to start. For a class of female employees of Morgan Stanley, this settlement may never be enough to compensate them for their earning potential before they took on one of Wall Street’s venerable trading firms. But it’s certainly large enough for other companies to take notice, and coupled with several other similar lawsuits in the past few years, hopefully enough to really start changing the culture for women on Wall Street.

Just minutes before a jury of eight women and four men was assembled in a Manhattan courtroom to hear opening arguments in the case of EEOC v. Morgan Stanley (01 CV 8421, Southern District of New York), U.S. District Judge Richard M. Berman made the announcement. After an intense weekend of negotiations, involving those at the very top (the chief executive of Morgan Stanley, Philip Purcell and the chairwoman of the EEOC, Cari M. Dominguez), a settlement had been reached, averting a trial which could have been risky for all of those involved.

Although the EEOC was trying this case on behalf of a class of women in Morgan Stanley’s institutional equities division, it was Allison K. Schieffelin who led the way. As one reporter pointed out, “The former institutional sales executive is not just any woman looking for a place in the securities business. She had a place but wanted a better one, a slot as a managing director, which is reserved for the top 2% at a firm like Morgan Stanley.” Schieffelin joined Morgan Stanley in 1986, after she received her MBA. Her lawyer, Wayne Outten (one of the cofounders of Workplace Fairness) describes her as “the ‘archetypal Morgan Stanley person’ who made the firm the highest priority in her life.” (See Newsday article.)

For ten years, Schieffelin was a star performer in the Convertible Department, receiving promotions first to Vice President and then to Principal. She was an extraordinarily successful sales person and also won high praise for her training of other employees. Her next goal was a promotion to the Managing Director position–a goal that very few ever attain. She first became eligible for promotion in 1996, but at the end of that year, some men who were not as qualified as Schieffelin were selected and she was not. (See Schieffelin complaint.) The same thing happened in 1997. In mid-1998, Schieffelin asked her immediate supervisor, Frank Platt, if she was on the promotion list for 1998. Platt responded “no.” Schieffelin asked if she was ever going to be promoted, to which Platt’s response was “not that I can see.” When she asked why, he said “not everyone gets Managing Director.” Of 50 Managing Directors in Schieffelin’s division, only 3 were women, and they were believed to be among the least powerful and lowest compensated managing directors in the division. As a result of being denied this promotion, Schieffelin filed a discrimination complaint with the EEOC in November 1998.

On a day-to-day basis, Schieffelin encountered discrimination typical of what other women have experienced in the workplace, and especially on Wall Street. (In the last several years, both Smith Barney and Merrill Lynch faced similar high-profile lawsuits based on discrimination against female employees. See New York Times and Bloomberg articles.) In order to succeed in a high-pressure sales environment, aggressive tactics are necessary, yet a double standard exists. (See Newsday article.) Schieffelin was told that she was “snippy” and “too emotional,” while her male colleagues who acted similarly were praised for being “aggressive” and “competitive.” She was told that she was “too focused on her work” and that she should direct her energy towards “more important things” such as “having a family.” She was excluded from social events and client meetings key to building relationships with her clients. Despite her avid interest and competency in golf, she was never allowed to attend an important golfing event held by her department each year at a golf resort in Florida, as it was known to be a “men’s only” event. She was excluded from one event in Las Vegas involving her clients so that those attending would feel more comfortable in participating in sexually-oriented entertainment activity, and on more than one occasion, was left out from meetings so that her male colleagues and clients could go to strip clubs. (See Schieffelin complaint. Note: This case settled without Morgan Stanley admitting liability, so the allegations from her complaint remain exactly that, allegations. As noted by the judge in the case, “The court is not ruling on the merits of any party’s allegations.” See New York Times article.)

After filing her discrimination complaint, the environment for Schieffelin intensified at Morgan Stanley. The firm diminished her role in training other employees, and withheld access to important information affecting her work and her clients. She didn’t receive the same level of support for executing trades as in the past, resulting in less attractive deals for her clients. She was accused of placing the firm at a “competitive disadvantage” because of the EEOC charges she filed. She was blamed for mistakes that she had not made, and her clients were told that she had committed errors. Her reviews, excellent before making waves, became much more negative, and her compensation declined. She was ultimately terminated, after a verbal exchange with another female colleague who had previously acknowledged that the reason she had been promoted to Managing Director was because Schieffelin had complained of gender discrimination after failing to be promoted. She was terminated without notice and escorted out of the building immediately, on the basis that she was “verbally abusive and insubordinate.”

On the basis of Schieffelin’s complaint, the EEOC investigated her claims of discrimination and retaliation, and ultimately decided to file a lawsuit on behalf of a larger class of women who suffered discrimination at Morgan Stanley. The case was filed on September 10, 2001, just a day prior to the tragedy which would so tragically affect the financial services industry and devastate the EEOC offices handling the case. While the EEOC is allowed to proceed in court against securities firms, some employees have been stymied in the past by rules binding all employees of securities firms which force claims to be arbitrated. In this case, however, Schieffelin was allowed to bring her claims individually, as a 1998 case and subsequent moves by the New York Stock Exchange reduced the amount of discrimination claims that would be subject to arbitration. (See Forbes article.)

Schieffelin chose to intervene in the EEOC lawsuit rather than going it alone, because she “wanted to have an impact.” She was slated to be its star witness at trial. The settlement that was reached not only provides financial relief for Schieffelin, but also for other women at Morgan Stanley. Notably, it also provides training and monitoring, in an effort to change the corporate culture so that others do not have to go through what Schieffelin endured. (See Consent Decree in EEOC v. Morgan Stanley.) Under the agreement reached, $40 million will be deposited into a claim fund for female employees, with each woman’s claims to be decided by a special master (retired federal judge Abner J. Mikva). Schieffelin will receive $12 million in damages from her termination, but will also be allowed to make a claim against the fund for damages resulting from her failure to be promoted and other discrimination she suffered while still on the job. Two million will be spent on diversity and antidiscrimination training at Morgan Stanley. (See Newsday article.)

While as Schieffelin’s attorney Wayne Outten told Workplace Fairness, “It is a great victory for my client, for the EEOC, and for women on Wall Street,” what is its ultimate impact likely to be? Will women be able to penetrate the upper echelons of Wall Street any time soon? The current statistics are grim: Though women accounted for 37 percent of employees in the securities industry in 2003, at the highest management level–executive management–their numbers dropped to 17 percent in 2003 from 21 percent in 2001. On the lower management levels they held just 12 percent of the branch office management positions, vs. 88 percent for men. That was unchanged from 2001. (See Newsday article.)

The amount of the settlement alone, while a mere pittance for Morgan Stanley to pay (it’s four days of profit and less than one day of revenue, according to one calculation) should be enough for other firms to sit up and take notice. (See Forbes article.) As noted by Judith Lichtman of the National Partnership, “This very large settlement will go a very long way to providing a wake-up call to the industry at large, that they better take a very close look at their business practices.” (See Newsday article.) A broker at Merrill Lynch, Hydie Sumner, who had her own case against that firm remarked, “That settlement sends a big statement that maybe she was a troublemaker, but her claim must have had merit or they wouldn’t have paid so much.” (See New York Times.)

The non-financial impact of the settlement, in the form of diversity training and monitoring, may even have more of a day-to-day impact on the culture of Morgan Stanley, and at other firms, if the strategy is adopted in an effort to forestall future claims. “This is not a short-term fix. It’s a three-year commitment with monitors and an ombudsperson.” said Manhattan attorney and NELA member Pearl Zuchlewski. Because the settlement document is public, “It is a road map for firms to look to if they want to try to ensure that they are doing everything they can reasonably do to retain and recruit women.” (See Newsday article.) For firms hoping to avoid this kind of litigation, Chicago attorney Mary Stowell, who brought the Merrill Lynch and Smith Barney cases, advises, “What they need to do instead of believing what they want to believe is take a look at the data [comparing the number of male and female employees in higher-level positions.]” Otherwise, she added, “They don’t see the big picture and they don’t know what kind of stereotypes they are harboring about what women could and should do.” (See New York Times article.)

While Schieffelin is now limited in what she can say publicly about the case, she was able to say, “I am so happy that there is a great settlement that’s good for everybody.” (See New York Times article.) Her sister says that “Had they been dealing with someone with a weaker stomach — with less balls — they would have won by outlasting that person. She just did not give up.” (See New York Post article.) We applaud her courage and that of her attorneys, and that of all the women on Wall Street who have taken on the “old boys club.”

As noted by one attorney, “To bring an entire industry into compliance will take some time.” (See Christian Science Monitor article.) However, by now, Wall Street should be hearing the loud noise of that tinkling glass, as the glass ceiling starts to come down and the victory toasts abound. And perhaps it’s so loud that it will be heard in other places, such as Bentonville, Arkansas (the corporate headquarters of Wal-Mart), as well.

Getting ready for the long Fourth of July Weekend, you might have missed the observance of a very important anniversary on Friday, July 2: the 40th anniversary of the passage of the Civil Rights Act of 1964. Those of you who regularly read our blog undoubtedly have more than a passing interest in Title VII, but how much do you know about how the law was passed, and how it has transformed American society? And on this important day, it’s also good to think about how far we have to go, and all the limitations that still prevent Americans from realizing the true promise of the law.

It was ten years after the decision in Brown v. Board of Education striking the separate but equal doctrine (the 50th anniversary of which was celebrated earlier this year, on May 15, to great fanfare). (See CNN.com article.) President Kennedy, inspired by the Brown decision, and subsequent efforts to desegregate America, had sent civil rights legislation to Congress in 1963, but the legislation contained little in the way of enforcement mechanisms. After the 1963 March on Washington, most famous for Dr. Martin Luther King’s “I Have a Dream” speech (audio/written text), the employment discrimination provisions (now known as Title VII) were beefed up. This happened in spite of President Kennedy’s opposition, who feared losing Republican support for the measure. Negotiations between the President, civil rights leaders, and business groups continued right up to Kennedy’s death by assassination in November 1963. (See EEOC “First Principles article.”)

Following the President’s death, the bill was one of the highest priorities for new president Lyndon B. Johnson, as well as Congress. While some told Johnson–a Southerner who already had a poor record on civil rights issues–that if the civil rights act were passed he would never be reelected, he pushed ahead anyway. (See Mercury News editorial.) The bill ultimately passed through both houses of Congress by large bipartisan majorities, and was signed into law by President Johnson on July 2, 1964. Title VII, the employment portion of the bill, made it illegal to discriminate in employment decisions “because of” an “individual’s race, color, religion, sex, or national origin” and to “limit, segregate, or classify” employees or applicants in any way that would deprive them of employment opportunities or adversely affect their status “because of” their “race, color, religion, sex, or national origin.”

A provision purportedly added to defeat the bill–the protection against sex discrimination–was ultimately part of the bill’s triumph. The legendary story is that Howard W. Smith, the Virginian head of the House Rules Committee, introduced “sex” to the measure as a joke, ridiculing the idea that you could legislate social behavior. (See Tallahassee Democrat article.) However, once feminists realized the import of having sex included, there began an aggressive push to keep the measure in the bill, led by Rep. Martha Griffiths, one of only nine women in Congress at the time. Some have later questioned whether the legend is true, and whether Smith was a friend rather than foe of the women’s movement(see EEOC “Expanding the Reach” article), but the enactment of the Title VII led to significant gains for women in the workforce as well as for others protected by the Act. While legislative history is scant for national origin discrimination, it too has become a significant form of protection for this form of discrimination, which has sadly become more prevalent since 9/11, especially for those of Middle Eastern origin.

So after 40 years of the Civil Rights Act, where do we stand now? There have been some significant improvements, to be sure. Here are just a few, noted in one editorial:

• While civil rights polarized America in the 1960s, 81% of Americans now say the movement was “extremely” or “very important.”

• Most Americans say they live in mixed communities.

• In 1958, an overwhelming 94% said they opposed interracial marriage; in 2003, 73% said they approved of it.

• Nine in 10 people now say they would vote for a black presidential candidate.

• In a 2003 survey, 70% of Americans said the quality of life for blacks has improved during the past 10 years.

(See USA Today editorial.) Prominent civil rights leaders also talk of the historic importance of the Act. “That legislation changed the face of America. It woke this country up,” said Myrlie Evers-Williams, whose husband, Medgar Evers, was shot dead for organizing African Americans for the Mississippi NAACP in 1963. (See San Francisco Chronicle article.) “This is the act that put meaning into the word discrimination. Title VII legitimized a women’s search for equality in the work force.” says historian Alice Kessler-Harris, who remembers when she was forced to sign a paper promising to tell her employer if she became pregnant. (See Tallahassee Democrat article.) A young black military officer, when hearing of opposition to the Civil Rights Act on the basis of “property rights,” responded:

“Let me tell you what ‘property rights’ means. If you’re a soldier and you’re black, you’d better have a strong bladder, because you won’t be stopping much between Washington, D.C., and Fort Benning.” You also will have a hard time, he continued, finding a decent place to eat, going to a restroom or spending the night while driving to Georgia with your wife and son. You can’t reduce this issue to whether a white hotel owner should have to rent a room to a black, he said. “You can’t put property in the same league with human beings.”

The name of that officer? Colin Powell, now the Secretary of State. (See Springfield News-Leader article.)

But despite how far we’ve traveled, a number of problems still remain. Discrimination is still with us. In one recent poll, when asked, “Is racial discrimination in the workplace a major problem or not?” 54% of blacks, 31% of Hispanics and 17% of whites responded that it was. (See USA Today editorial.) Two studies conducted in California, using black and white testers to apply for the same job at temporary employment agencies found a “significant preference for white job applicants over equally qualified or more qualified black job applicants,” said John Trasvina, director of the Discrimination Research Center. “In some cases we gave the black applicant more job experience than the white applicant,” said Trasvina. “The white applicant (still) got a job quicker, was offered a permanent job or was offered a job at a higher compensation than the black applicant.” Doesn’t sound that much different than 40 years ago, does it?

There are also problems with the Civil Rights Act itself which need to be repaired. When you combine the Act’s age, with new problems and trends arising since the 1960s, with a series of conservative Supreme Court and lower court decisions gradually eroding some of the protections necessary to fully realize the civil rights dream, you find more work to be done. A number of fixes to the Civil Rights Act that are among the most urgent have been wrapped into a legislative fix proposed earlier this year: FAIRNESS: the Civil Rights Act of 2004 (HR 3809/S 2088). The FAIRNESS Act was discussed in more detail in our blog entry of February 19, 2004, but here’s what you need to know:

Recent decisions from the Supreme Court restrict the ability of individuals to seek protection in court for violation of their rights as guaranteed by Congress. Unfortunately, it is the most vulnerable members of our community who suffer as a result of these rollbacks: children, the disabled, women, older Americans, immigrants, and working people.

The fight for FAIRNESS is being led by the Leadership Conference for Civil Rights (LCCR), the leading coalition of national civil rights organizations, and endorsed by its member groups, including our allied organization NELA. The LCCR web site has a great deal of material about FAIRNESS,including a link where you can take action. While we’ve come a long ways, we all have much further to go. Only if all of us remain vigilant will all workers remain part of the discrimination-free workplace that the Civil Rights Act of 1964 was designed to make reality. Working to pass the FAIRNESS Act is an important piece of what remains to be done.

More Articles and Commentary:

Los Angeles Times: Living Separately and Unequally

Associated Press (Seattle Post-Intelligencer): Protestors Criticize EEOC Over Efforts

The Olympian (Gannett News Service): Month marks 40th year of Civil Rights Act

New York Times: Bush Marks 40th Anniversary of the Civil Rights Act

Kerry’s Statement on 40th Anniversary of Civil Rights Act