The Biden administration is set to unveil a new proposed rule on Wednesday that would expand overtime pay eligibility to an additional 3.6 million US workers. This rule, which was previously introduced during the Obama administration but faced legal challenges, would require employers to pay overtime to white-collar workers who earn less than $55,000 annually. The current threshold is set at $35,568, increased from $23,660 by the Trump administration in 2019.
Under the proposed rule, the salary level for overtime pay would also automatically increase each year. This change aims to address the erosion of overtime protections over the years due to wage stagnation and inflation, a concern raised by labor advocates and liberal lawmakers. This move is expected to impact industries such as retail, food, hospitality, and manufacturing, where many managerial employees fall within the new salary threshold.
Acting Secretary of Labor Julie Su expressed empathy for workers who have been working long hours without receiving extra pay. She acknowledges that their low salaries do not adequately compensate them for their sacrifices.
The Fair Labor Standards Act states that almost all hourly workers in the US are entitled to overtime pay after working 40 hours a week, at a rate of time-and-a-half their regular wages. However, salaried workers in executive, administrative, or professional roles are exempt from this requirement if their earnings exceed a certain level. Under the previous Trump-era policy, only around 15% of full-time salaried workers were eligible for overtime pay, compared to over 60% in the 1970s. With the new rule, it is estimated that 27% of salaried workers would be entitled to overtime pay, according to the Labor Department.
The proposed rule will undergo a public commentary period before taking effect, which could take several months. It may face opposition from business groups, as similar regulations were successfully challenged during the Obama administration. Some business leaders argue that setting the salary requirement too high could worsen staffing challenges for small businesses and potentially lead to the conversion of salaried workers into hourly ones for better time tracking. The National Association of Manufacturers has even threatened to challenge any expansion of overtime coverage due to disruptions caused by supply chain and labor supply difficulties.
Overall, the new rule presents a compromise between labor advocates and business groups, falling short of the demands for a higher salary threshold while still providing greater overtime pay eligibility to millions of workers.
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