Salary requirements may soon change, making more workers eligible for overtime benefits. The Biden administration has introduced a new rule that seeks to extend overtime pay eligibility to an additional 3.6 million U.S. workers, marking one of the most substantial increases in decades.
The proposed regulation, presented by the Department of Labor, aims to mandate overtime pay for salaried employees in professional, administrative, and professional roles whose income falls below $55,068 annually for full-time work. This threshold is a notable escalation from the previous level of $35,568 set in 2019 by the Trump administration, and President Obama’s earlier proposal of $23,660. The proposal, however, falls short of the demands of some progressive lawmakers and unions who were advocating for an even higher threshold than the proposed $55,000.
Under the Fair Labor Standards Act, almost all U.S. hourly workers are entitled to overtime pay after 40 hours per week, at a rate of one-and-a-half times their regular wages. However, salaried employees in executive, administrative, or professional roles are exempt from this requirement if their earnings exceed a certain level. The regulation surrounding overtime has seen infrequent updates over the years, with the Trump administration’s adjustment being the first since 2004. The Labor Department’s current proposal aims to alter this pattern by implementing automatic salary threshold increases every three years.
Despite its potential benefits, business leaders contend that setting the salary requirement too high could worsen staffing challenges for small enterprises and potentially compel businesses to convert salaried employees to hourly ones to better track working hours. Under the new rule, around 27% of salaried workers would be eligible for overtime pay due to their earnings falling below the established threshold.
The proposed rule’s goal is to strike a balance that addresses concerns raised during legal challenges against the old policy, notably the notion that a high threshold sidelined the “duties” test that determines eligibility for overtime pay based on job roles. The Department of Labor has aimed to rectify this concern while achieving a more equitable standard.