About 4.3 million U.S. workers who previously didn't qualify for overtime pay could soon receive time-and-a-half for working more than 40 hours a week thanks to a new rule from the Biden administration.
The U.S. Department of Labor on Tuesday unveiled a new rule that will extend overtime pay to salaried workers who earn less than $1,128 per week, or $58,656 annually. Previously, only workers who made $684 or less each week, or $35,568 annually, were eligible for OT.
Businesses are required to pay workers 1.5 times their pay if they work more than 40 hours a week, but that protection has been limited to hourly workers and lower-earning salaried employees. Because of the salary cutoff, many salaried workers were performing the same duties as their hourly coworkers, but weren't able to qualify for overtime, Acting Labor Secretary Julie Su said in a statement.
"This 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," she said.
The new rule could result in an additional $1.5 billion in pay for employees, according to an estimate from the Economic Policy Institute, a left-leaning think tank.
"Employers will be more than able to adjust to the rule without negatively impacting the overall economy," wrote EPI director of government affairs and advocacy Samantha Sanders and President Heidi Shierholz.
Here's what to know about the new OT rule.
Why is overtime pay getting overhauled?
The Fair Labor Standards Act requires that most workers who spend more than 40 hours a week on the job receive 1.5 times their regular pay for each hour they work beyond that amount.
While the law covers nearly all hourly workers, salaried employees only qualify for OT if they earn below a specific salary. Currently, that threshold is $684 per week, or $35,568 annually.
That means a salaried worker earning less than that cutoff "can be forced to work 60-70 hours a week for no more pay than if they worked 40 hours," Sanders and Shierholz wrote. "The extra 20-30 hours are completely free to the employer, allowing employers to exploit workers with no consequences."
Who is covered by the new overtime rule?
The law covers salaried workers who earn below certain thresholds, and it will kick in through two phases.
Starting July 1, salaried workers who earn less than $844 per week, or $43,888 per year, will be covered by the new rule. On January 1, 2025, the salary threshold will jump to $1,128 per week, or $58,656 per year, the Labor Department said.
Most of the additional workers who will now qualify for OT are in professional and business services, health care, and social services as well as financial activities, EPI said. About 2.4 million of the 4.3 million workers are women, while 1 million of color, it said.
Who won't qualify for OT?
First, overtime pay isn't available to salaried workers who are considered "executive, administrative or professional" employees.
Some researchers have pointed out that corporations give fake titles to low-ranking workers like "grooming manager" for a barber in order to make them appear like managers.
The new rule stipulates that only "bona fide" executive, administrative or professional employees are exempt from the expanded OT rule.
What are businesses saying about the new rule?
Some industry groups are pushing back against the overtime rule, saying that it will harm their operations and lead to job cuts. Some are also threatening legal action.
"We fear many hoteliers will have no option other than to eliminate managerial jobs that are long-established paths to advancement," American Hotel & Lodging Association (AHLA) interim President Kevin Carey in a statement. "AHLA is reviewing all available options, including litigation, for defeating this ill-advised regulation."
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