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Many Silicon Valley companies expected to see their labor costs go up after the state's new overtime law went into effect Jan. 1, but some industries aren't sure whether they'll be affected at all.

That's because the California Industrial Welfare Commission has until July 2000 to interpret parts of the law, even deciding whether certain industries will be exempted from its provisions.

The law, backed by organized labor, was signed earlier this year by Gov. Gray Davis. In general, it requires most California employers to pay overtime rates to workers after eight hours of work in a day, rather than after 40 hours of work in a week.

Employers that have collective bargaining agreements with unions are exempt from the new law. At least until next July, so are licensed hospitals, ski resorts and a number of other businesses that were eventually exempted from the original 8-hour-day law that's governed overtime pay in California since 1911. The IWC will decide which of those groups will continue to be exempt and may also consider requests for exemptions from other industries.

The IWC is the same agency that ended daily overtime requirements in California beginning in 1998 in a regulatory move that was supported by business interests, who said it would make them more competitive with firms in other states, most of which abide by the federal 40-hour workweek.

Organized labor fought back with AB 60, "The 8-Hour Day Restoration and Workplace Flexibility Act of 1999," which was backed by the California Labor Federation AFL-CIO.

Among companies likely to be faced with tough decisions and potentially higher costs: manufacturers—including some of the valley's largest technology firms—and nonunion construction companies.

"It will have an impact. It all trickles down and ultimately somebody is going to pay for this," said Tony Silveria of Gen-Con Inc., a Campbell-based general contractor. His company's labor costs could increase if it hires nonunion subcontractors.

Most technology manufacturers here employ nonunion work forces.

"It's more the traditional computer makers that would have to rethink the whole situation," according to Teresa alternative schedules

that allow them to work up to 10 hours a day within a 40-hour week without overtime pay. And unions can negotiate alternatives to the regulations for their members.

Although many valley general and subcontractors are unionized and won't be affected, a substantial number of carpentry, dry walling, roofing and other building-related trades here are nonunion. Higher labor costs for those companies will be felt in the cost of construction.

"It will just increase the price of the project," said Diane Birch, human resources director for W.L. Butler, a Redwood City-based general contractor. W.L. Butler has about 115 employees; of those, 20 are paid by the hour and therefore could be affected by the law. The general contractor builds retail stores like Mervyn's, Target and Orchard Supply Hardware stores.

On the administrative end, the new law will be a major headache because many of W.L. Butler's hourly employees work at several job sites. It will be difficult to

decide which job budget should incur the overtime costs, Ms. Birch said.

Schools will probably feel the increased costs. There is a huge amount of renovation and seismic retrofitting under way funded by bonds. General contractors will have to pay more for subcontractors, and that will leave schools with less money for other projects, Gen-Con's Mr. Silveria said.

The IWC will discuss how construction and other industries will be affected by the law during public hearings in November and December.

Bifi Steuben, a senior consultant for Innovative H.R.M. Inc., a Santa Clara-based human resources management consulting firm, said the new law potentially could reduce companies' flexibility, but it all depends on how the law is interpreted by the IWC.

"We are groping at the same time everyone else is," he said.


You can reach Ms. Graebner at

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