What you need to know about new overtime rule that will benefit millions
Millions of American workers will soon be eligible for overtime pay thanks to a final rule announced by the U.S. Labor Department this week.
The development represents the biggest increase in the federal overtime threshold in decades. Beginning July 1, salaried workers earning less than $43,888 a year will qualify for 1.5 times pay if they work more than 40 hours a week. That’s up from the current ceiling of $35,568 a year.
The threshold will expand again to salaried workers making less than $58,656 on Jan. 1, 2025.
Acting Labor Secretary Julie Su said, in a statement on Tuesday, that the “rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time.”
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Who will benefit?
The rule will boost wages for many workers in low-wage but salaried occupations - including in hospitality, health care, finance, manufacturing and retail - making them eligible for time-and-a-half pay after working more than 40 hours in a week.
Most hourly workers are already entitled to overtime pay, but non-hourly workers in executive, administrative and professional roles - including some supervisors - are exempt unless they earn less than the threshold set by the Labor Department.
For example, a salaried restaurant supervisor or office worker who makes more than $35,568 but less than $58,656 could now be eligible for overtime pay. The proposed change stands to boost the pocketbooks of millions of the country’s most vulnerable workers, including women, people of color and workers without college degrees.
An Economic Policy Institute analysis of the rule found that 4.3 million more workers will be eligible for overtime pay because of the rule. That includes 2.4 million more women and 1 million more people of color.
Salary thresholds for overtime eligibility will be updated every three years, the Labor Department said, based off wage data.
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Who opposes the rule?
Business associations and conservative lawmakers have rushed to protest the rule, saying it could exacerbate inflation, by raising prices and even result in job losses. The National Retail Federation, the National Restaurant Association, and the International Franchise Association are among the rule’s critics.
David French, executive vice president of government relations at the National Retail Federation, said the rule could result in workers losing managerial positions, the ability to work from home and “cause employers to reexamine compensation packages for millions of workers nationwide.”
“This rule is the latest unnecessary and burdensome regulation from the Biden administration targeting small businesses,” said Michael Layman, senior vice president of government relations and public affairs at the International Franchise Association in a statement.
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Will the rule receive legal challenges?
Business and trade organizations are expected to challenge the development in court, as they previously did when the Obama administration moved to more than double the threshold. After business groups and states sued over the rule in 2016, a federal judge issued an injunction blocking it. The Trump administration later abandoned the rule, bringing the threshold down to $35,568 a year, its current level.
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