The US Department of Labor released a final rule on Tuesday that will soon make millions of salaried workers eligible for overtime pay.
The Biden administration introduced a rule that expands mandatory overtime pay to approximately 4 million salaried workers, surpassing the scope of an Obama-era regulation that was thrown out by the courts.
The existing salary threshold, established by the Trump administration, for overtime pay stands at approximately $35,500 per year. However, this threshold has been criticized by worker advocates and numerous Democrats for not being sufficiently expansive.
The new rule implements a two-stage increase to the salary threshold for salaried employees eligible for overtime pay. Effective July 1, the threshold will rise to an annual salary equivalent of $43,888, or $844 per week, for hours worked beyond 40 in a week. On January 1, 2025, it will further increase to $58,656 annually, or $1,128 weekly.
The rule does not impact overtime requirements for hourly workers.
Salaried workers earning above the salary threshold may still qualify for overtime pay if their primary duties are not managerial in nature.
Typically, workers earning a salary exceeding $107,432 are automatically exempt. The new rule will elevate this threshold to approximately $151,000.
In the first year, the rule is expected to result in an income transfer of approximately $1.5 billion from employers to workers.
According to the U.S. wage law, employers are required to compensate eligible workers at one and one-half times their regular rate of pay for hours worked beyond 40 in a week.
Acting Secretary of Labor Julie Su, who is also Biden's nominee for the permanent position, said in a statement that the rule guarantees workers either receive increased earnings or maintain their current pay while working fewer hours.
"This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time," she said in a statement.
"Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable."
The department announced that the salary threshold will undergo updates every three years, commencing on July 1, 2027.
Resistance from business groups is expected, similar to their successful opposition during the Obama administration's previous attempts to substantially increase the threshold.
When the latest proposed rule was unveiled in August, trade associations swiftly voiced objections, contending that it would elevate costs for their members and negatively impact their operations.
But unions, worker advocacy groups, and numerous Democrats have lent their support to the rule. The AFL-CIO, the nation's largest labor federation, commended the Biden administration's decision in a statement, hailing it as a restoration of overtime protections that had been "gutted" during the Trump administration.
