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
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
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
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
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
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
"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.