By now, Abigail Rosa's story is the stuff of modern water cooler legend. An administrative assistant and paralegal, she worked in law firms for 26 years before jumping to

Xilinx

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in search of stock market riches. In the three years since Rosa signed on, the San Jose, Calif.-based circuit maker's stock has gained 700%.

But the opportunity that created her uncommonly good fortune may come at a steep price to employees like Rosa. As big corporations expand their stock option plans to include non-salaried wage earners, they are lobbying aggressively to take away more dependable forms of compensation that labor unions worked for years to win.

Current law does not specifically address stock options, but the

Department of Labor

has written that the value of a stock option plan should be included in the calculation of workers' legally mandated time-and-a-half overtime pay. Companies complain that this policy would require them to pore over years of records to calculate the value of the options and award overtime pay. Some critics say the companies' gripes are unfounded and part of a larger effort to dole out risky options instead of wages and to avoid paying overtime.

"As long as stock options are just going to executives and managers, the issue is moot," said Dean Baker, an economist at the

Center for Economic and Policy Research

. "As this moves down the pay spectrum, this is a real issue. If they already have the incentive to pay in options because they can hide it on the books, and now they have the added incentive of not having to count it on overtime, you'll be pushing firms to pay more and more in options to the point where it doesn't make sense."

The issue germinated in February 1999 when the Department of Labor wrote a letter to a Boston lawyer who had asked whether a stock option program would violate the

Fair Labor Standards Act

, which was designed to prevent employers from cheating workers out of overtime pay by devising alternative payment methods.

The law, instituted in 1938, has never addressed stock options, though the number of workers paid with options has grown from 1 million in the early 1990s to at least 8 million now, according to statistics compiled by the

National Center for Employee Ownership

.

To what degree the practice has begun to include those wage earners is unclear. A study by economists Kevin J. Murphy and Brian Hall found that 10% of publicly traded companies offer options to hourly employees, and a

Federal Reserve

study of 415 large companies found that 7% offer options to non-managerial and non-professional employees. The

Bureau of Labor Statistics

is currently surveying around 2,000 companies for a report it plans to publish this summer.

The Fair Labor Standards Act already includes some exemptions, including profit-sharing programs and outright gifts. Stock option programs carry varying rules, but they usually grant employees the right to buy shares of the company's stock at a later date, presumably after the stock's price has risen above the purchase price. The program described by the Boston lawyer was typical, and Labor wrote that it did not qualify as an exemption. For instance, since the program required employees to stay with the company, the option grants could not be described as a gift.

The issue lay dormant for almost a year before the letter drew the attention of business lobby groups. In January, Republican members of the

House Committee on Education and the Workforce

told Labor Secretary Alexis M. Herman their concerns in a letter.

"An employer would have to undertake a burdensome and complicated process of going back, over what could be a significant amount of time, and recalculating an hourly-paid employee's overtime pay based on the profits earned under stock options," wrote committee chairman Bill Goodling, R-Pa.

Last week, Rep. Cass Ballenger, R-N.C., introduced a bill that would prohibit the Labor Department from requiring companies to include stock options in the calculation of overtime pay.

But Baker, the Center for Economic and Policy Research economist, said "it doesn't strike me as that hard, given computers, to figure out the value of the options."

In fact, GTE was able to provide precise figures for the value of options it had granted.

J. Randall MacDonald, executive vice president for human resources at

GTE

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and spokesman for the employers' group

LPA

, told the committee that his company would stop offering options to 50,000 hourly employees if the law does not exempt options from overtime. In 1996, the company granted 2.7 million options to 53,000 employees, resulting in a total gain to the employees of $58 million, or $1,000 apiece on average. The next year, it granted 5.8 million options to 57,500 employees, resulting in gains of $100 million, or $1,800 apiece.

"The Department of Labor's interpretation, if allowed to stand, will have the effect of denying wealth to rank-and-file employees rather than bolstering it, regardless of how many hours they work," MacDonald said.

But it is the companies themselves, not the Labor Department, that seem responsible for that denial of wealth, some critics say.

Companies "are looking for any way they can to erode the Fair Labor Standards Act," said Jared Bernstein, a labor economist at the

Economic Policy Institute

. For wage earners who take a lower salary in exchange for stock options, "as long as the market's booming, you're fine. As soon as the bottom falls out, you have worthless stock options."

While the Labor Department is concerned that employees are treated fairly, the agency will walk on thin ice as the issue develops, said spokesman Howard Waddell.

"In some ways, as long as the person is being paid minimum wage, it's not our business," Waddell said.