[Congressional Record Volume 146, Number 38 (Thursday, March 30, 2000)]
[Extensions of Remarks]
[Page E455]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          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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