The Biden administration will propose a new rule on Wednesday that would make an additional 3.6 million American workers eligible for overtime pay, reviving an Obama-era policy effort that ultimately failed in court.
The new rule, shared with The Associated Press ahead of its announcement, will require employers to pay overtime to so-called white-collar workers who make less than $55,000 a year. That’s above the current threshold of $35,568, which has been in effect since 2019, when the Trump administration raised it from $23,660. Another big change is that the rule proposes automatic annual wage increases.
Labor advocates and liberal lawmakers have long pushed for a big expansion of overtime protections, but overtime protections have eroded dramatically over the past few decades due to wage stagnation and inflation. The new rules, which are subject to a public comment period and won’t take effect for several months, will have the biggest impact on retail, food, hospitality, manufacturing and other industries where many managers hit the new threshold.
Acting Labor Minister Julie Su said in a statement: “I have heard time and time again from workers saying that they are working long hours for no extra pay while earning wages that simply cannot be compensated. their sacrifice.”
The new rule is likely to face resistance from business groups that mounted a successful legal challenge to a similar rule announced by Biden as vice president during the Obama administration, when he sought to raise the threshold above $47,000. But it also falls short of demands by some liberal lawmakers and unions for a higher salary threshold than the proposed $55,000.
Under the Fair Labor Standards Act, nearly all U.S. hourly workers are entitled to overtime pay of no less than half their regular wages after working a 40-hour week. But salaried workers in executive, administrative or professional positions are exempt from this requirement unless they earn below a certain level.
The left-leaning Economic Policy Institute estimates that about 15 percent of full-time wage earners are entitled to overtime pay under Trump-era policies. This compares with more than 60 percent in the 1970s. According to the Labor Department, under the new rules, 27 percent of wage earners will be entitled to overtime pay because they earn less than the threshold.
Business leaders argue that setting salary requirements too high would exacerbate staffing challenges for small businesses and could force many companies to convert salaried employees to hourly workers to keep track of hours worked. The business community, which challenged the Obama-era rules, praised the Trump administration’s policies as balanced, while progressive groups said it left millions of workers behind.
A group of Democratic lawmakers is urging the Labor Department to raise the wage threshold to $82,732 by 2026, in line with 55% of what full-time salaried workers earn.
A senior Labor Department official said the new rule would bring the threshold in line with 35 percent of a full-time salaried worker’s earnings. That’s up from the current rule’s 20 percent, but below the failed Obama-era policy of 40 percent.
The National Association of Manufacturers warned last year that it may question any expansion of overtime coverage, saying the change would be disruptive amid lingering supply chain and labor supply difficulties.
Under the new rules, about 300,000 manufacturing workers will be entitled to overtime pay, according to the Labor Department. A similar number of retail workers, 180,000 hospitality and leisure workers and 600,000 healthcare and social services workers will also be eligible.