The Biden administration has finalized a new rule that will make millions of salaried workers eligible for overtime pay in the U.S. The new rule will go into effect on July 1 and will require employers to pay overtime to salaried workers who make less than $43,888 a year in certain roles. This threshold will increase to $58,656 by the start of 2025. The Labor Department believes that this move will help lower-income workers who are often doing the same job as hourly workers but are not receiving additional pay for their extra hours.
This new rule represents a significant increase from the previous overtime eligibility threshold of $35,568 set under the Trump administration in 2019. The federal law entitles nearly all hourly workers to overtime pay after working 40 hours a week, but many salaried workers are exempt unless they earn below a certain level. The new rule also expands overtime eligibility for highly-compensated workers, with the threshold set to increase to $132,964 on July 1 and $151,164 by 2025.
The Labor Department estimates that 4 million lower-paid salaried workers who are currently exempt will become eligible for overtime protections under the new rule. Additionally, 292,900 higher-compensated workers are expected to gain overtime entitlements. The increase in the salary thresholds will be implemented using a methodology put in place by the Trump administration in 2019 and will be updated every three years based on the latest wage data.
The Biden administration first announced plans for the new rule in late August and submitted a proposal in September. The Labor Department engaged with employers, workers, unions, and other stakeholders to consider feedback and comments as they developed the final rule. Critics of the regulation argue that it will impose new costs on companies and exacerbate existing labor challenges. Meanwhile, advocates of the rule applaud the administration’s efforts, noting that the overtime threshold has not been updated properly for almost 50 years, leaving millions without federal protections.
U.S. Representative Virginia Foxx, a North Carolina Republican and chair of the House Education and the Workforce Committee, expressed concerns about the new rule, stating that it could lead to billions in annual costs for employers. On the other hand, advocates like the left-leaning Economic Policy Institute see the rule as an important step in valuing workers’ time and creating a fairer economy. EPI President Heidi Shierholz believes that the rule is essential in ensuring that workers are properly compensated for their efforts and time, addressing long-standing issues of fairness and equity in the workforce.
