The Biden administration will propose a new rule Wednesday that would make 3.6 million more US workers eligible for overtime pay, reviving an Obama-era policy effort that was ultimately scuttled in court. The new rule, shared with the AP ahead of the announcement, would require employers to pay overtime to so-called white collar workers who make less than $55,000 a year. That's up from the current threshold of $35,568, which has been in place since 2019, when the Trump administration raised it from $23,660. In another significant change, the rule proposes automatic increases to the salary level each year. Labor advocates and liberal lawmakers have long pushed a strong expansion of overtime protections, which have sharply eroded over the past decades due to wage stagnation and inflation.
The new rule, which is subject to a public commentary period and wouldn't take effect for months, would have the biggest impact on retail, food, hospitality, manufacturing, and other industries where many managerial employees meet the new threshold. "I've heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don't come anywhere close to compensating them for their sacrifices," says acting Secretary of Labor Julie Su.
Under the Fair Labor Standards Act, almost all US hourly workers are entitled to overtime pay after 40 hours a week, at no less than time-and-a-half their regular rates. But salaried workers who perform executive, administrative, or professional roles are exempt from that requirement unless they earn below a certain level. The left-leaning Economic Policy Institute has estimated that about 15% of full-time salaried workers are entitled to overtime pay under the Trump-era policy. That's compared to more than 60% in the 1970s. Under the new rule, 27% of salaried workers would be entitled to overtime pay, per the Labor Department.
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The new rule could face pushback from business groups that mounted a successful legal challenge against similar regulations that Biden announced as vice president during the Obama administration, when he sought to raise the threshold to more than $47,000. But it also falls short of the demands by some liberal lawmakers and unions for an even higher salary threshold. Business leaders argue that setting the salary requirement too high will exacerbate staffing challenges for small businesses and could force many companies to convert salaried workers to hourly ones to track working time. The National Association of Manufacturers last year warned that it may challenge any expansion of overtime coverage, saying such changes would be disruptive at a time of lingering supply chain and labor supply difficulties.
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