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Legislation Could Make Stock Options
Available to More Workers

By Alice Ann Love   Associated Press
WASHINGTON — The Clinton administration is recommending a change in the nation's labor laws to encourage companies to offer stock options to all workers — not just executives.

Stock options "allow workers to obtain a stake in their employer's growth, prosperity and profits," said Labor Secretary Alexis Herman.

Republicans on the House Education and Workforce Committee have agreed that a clarification of the 1938 Fair Labor Standards Act would be helpful in spreading stock-option benefits to more workers, and say they hope to speed it through Congress this year.

"If there were such a thing as a no-brainer, this would be it," said Rep. Peter Hoekstra, R-Mich.

Stock options give employees a chance to buy stock in the company they work for at a preset price during a limited time period. If the stock then rises beyond that price, the employee profits.

Most often, they have been offered to high-level executives as a personal incentive to make a company profitable. But a growing number of companies have begun offering stock options to lower-level workers as well, among them Xerox, Starbucks, Microsoft and Proctor & Gamble.

The number of workers receiving stock options has grown from an estimated 1 million to between 7 million and 10 million since the early 1990s.

The 1938 labor law includes provisions meant to prevent employers from scheming to keep overtime pay rates low by devising creative ways to compensate workers outside of their regular wages.

The law exempts some employee benefits such as health insurance, retirement plans and some profit-sharing from overtime pay calculations.

But stock options do not fall neatly into one of those existing categories, according to Labor Department Wage and Hour Administrator T. Michael Kerr who testified at a House Education and Workforce subcommittee hearing on Thursday. Therefore, the administration is recommending that Congress create a separate exemption for stock options.

Without the change, Kerr said, the design of some stock-option plans could mean companies would have to pay higher overtime rates to hourly wage workers — who, unlike salaried professionals, are entitled to time-and-a-half pay when they work more than a 40-hour week.

Some corporate executives were surprised last year by an informal Labor Department advisory letter indicating that one company's proposed stock-option plan would have to be treated as part of hourly workers' normal compensation. That would boost the worker's base pay rate, and therefore would require the company to pay a higher overtime rate, said the advisory.

Companies say that would be costly and administratively burdensome, discouraging the spread of stock options to lower-income Americans.

"The bottom line is that we will discontinue it" if it means paying higher overtime, said J. Randall MacDonald, vice president for human resources at GTE Corp., which has offered stock options to 53,000 hourly workers.

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