Money & Politics | Daily Report

Rather than receiving a 15-percent pay cut as intended, hundreds of state managers and other high-level workers brought home more money than usual during some furlough weeks thanks to an obscure federal labor law, a California Watch review of state records has found.

During furlough weeks between February 2009 and April 2010, state departments paid at least $1.6 million in overtime to salaried state workers who are not typically eligible to receive it, according to data provided by the state controller's office. At least 14 employees took home more than $10,000 in overtime payments during that period.

The payments were allowed because during furlough weeks, federal law requires the state to temporarily classify most salaried workers as hourly employees so their pay can legally be reduced.

But that shuffle has a side effect: It makes employees who are typically exempt from overtime rules eligible for a rare opportunity to collect the extra cash.

More such payments could be made in coming months, following Gov. Arnold Schwarzenegger's announcement last week that furloughs will continue at least until the state budget is passed.

Of the three-dozen departments that paid at least some overtime to exempt workers, none shelled out more than the Employment Development Department, which paid more than $488,000. The department is charged with running California’s unemployment programs, which have been swamped in the down economy.

Department spokeswoman Loree Levy said demand for unemployment benefits and information technology projects within the department led to the overtime, which she said was closely monitored and approved.

“Overtime payments to salaried staff are a direct result of the unprecedented demand for service EDD has faced through the course of this severe recession,” Levy said in a statement.

Not far behind was the Chief Information Officer's office, which coordinates IT work across state government. Records show the department paid more than $327,000 in overtime to exempt employees.

Department spokesman Bill Maile said the payments were made largely to employees tasked with keeping the state’s computer systems running smoothly. Others were made to employees involved in high-priority projects, such as building Web sites that outline state stimulus-fund spending, he said.

“They’re mission-critical applications that require staff to be there regardless (of furloughs),” Maile said. “We have pretty strict conditions under which staff can work overtime.”

Maile and others also argued that labor laws gave them no choice but to pay the overtime. Even if they are typically salaried, hourly employees are legally required to be paid for any overtime they work.

“These are situations governed by federal law that determine whether overtime applies,” Maile said.

The state Department of Personnel Administration issued at least three memos during the furlough period urging departments to minimize their overtime payments to exempt employees. Department spokeswoman Lynelle Jolley declined further comment but said the memos make clear the department's stance that overtime should be kept to a minimum.

One of the memos, issued last July, lays out the issue in detail:

Manage employees who are exempt from (Fair Labor Standards Act) [Work Week Group E] to avoid overtime situations. On weeks that FLSA exempt employees have a furlough day or use accumulated furlough hours they lose their exempt status and become hourly employees.  

Departments may direct employees to take his/her furlough on another day other than a shut-down furlough Friday when it is absolutely necessary to work an employee more than 32 hours in the furlough workweek.  

Example: An employee works in a department that has three shut-down furlough Fridays and a critical project is currently underway. Management needs to have the employee work on the scheduled furlough Friday, which occurs on July 10, in order to meet a critical deadline. You could change the employee’s furlough day by working them on July 10 and have them take another day off the last week in July where a furlough Friday does not occur.

Most employees were not paid enough in overtime to make up for the 15 percent pay cut imposed by the furlough, but some did recoup a significant chunk of their losses.

For example, records show that Kirk Breed, executive director of the California Horse Racing Board, received nearly $7,200 in overtime payments -- more than one-third of the estimated $17,000 he would have lost to furloughs, according to the salary posted in a board press release.

“The problems and concerns in horse racing do not begin at 8 a.m. and end at 5 p.m., Monday through Friday,” Breed wrote in a statement. “The furlough program impinged upon the working schedules of people charged with overseeing horse racing. The overtime authorized for certain CHRB personnel allowed them to properly regulate the sport.”

The data provided to California Watch does not distinguish between payments made to furloughed employees and payments made to other exempt employees who might receive overtime for other reasons, though those situations are rare.

So, bear that in mind when you check out the department totals below: