Biden administration wants to hike overtime threshold from current rate of $35,000
The U.S. Department of Labor (DOL) announced a new proposed rule Wednesday morning that would bring overtime pay to 3.6 million more employees in the U.S.
The new rule would give overtime pay to “white collar workers” who make less than $55,000 per year, or $1,059 per week, as opposed to the $35,000 current rate, the New York Post reported.
The change would have the biggest impact on industries where managerial positions will meet the new threshold, such as in manufacturing, retail, hospitality and food.
‘Long hours, for no extra pay’
Around 300,000 manufacturing employees are expected to be eligible for overtime under the new proposed rule, according to the DOL.
“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,” said Acting Secretary of Labor Julie Su in a statement.
Almost all workers in the U.S. are entitled to no less than time-and-a-half overtime compensation after working 40 hours in a week, except for salaried workers who are exempt. An exception is made for salaried workers who make below a certain threshold.
‘Difficult decisions’ for employers with overtime changes
Business leaders oppose the rule as they say it “could force many companies to convert salaried workers to hourly ones to track working time,” the Post reported.
If the rule is implemented and survives the inevitable court challenges, said Neil Dishman, a Chicago-based attorney, on LinkedIn, “it will force employers into difficult decisions.
“For employees who are currently exempt and earn a salary of less than $55,068, with a few narrow exceptions, employers would either have to (a) give the employees a raise to $55,068 (regardless whether their experience, job performance, tenure, etc. justifies such a raise); or (b) convert the employees to non-exempt, meaning the employees would be paid hourly, punch a clock, and earn time-and-a-half overtime pay if working more than 40 hours in a week.”
In April, the U.S. Supreme Court looked at a case involving a rig oil worker who, despite earning a daily rate that added up to over $200,000 a year, said he was entitled to overtime pay because he did not meet the salary basis requirement mandated by the Fair Labor Standards Act (FLSA).
Eligibility criteria updated every three years
The new rule exceeds an Obama-era proposal that was struck down in court, Reuters reported, and builds on the Trump administration’s $35,000 per year threshold.
It would financially benefit millions of vulnerable workers in the U.S., The Washington Post reported, including women of color and employees without post-secondary education.
"For too long, many low-paid salaried workers have been denied overtime pay, even though they often work long hours and perform much of the same work as their hourly counterparts," said DOL wage law enforcement head Jessica Looman in a statement.
Another significant change with Biden’s new rules would see the overtime eligibility criteria automatically updated every three years according to wage date, the Post wrote, adding that the proposed rule will face “fierce opposition” from business interests, such as the Associated Builders and Contractors and the National Association of Manufacturers, both of which have already expressed concern.
There will now be a 60-day public comment period before the proposal is confirmed.