The U.S. Department of Labor issued notice Wednesday of a proposal to increase the threshold for required overtime payments to salaried workers whose weekly or annual wages are considered low income.
If enacted, the proposed rule would guarantee overtime pay for most salaried employees earning less than $1,059 per week, or about $55,000 per year. It also calls for an “escalator” that automatically updates the salary threshold every three years to reflect current earnings data. The Labor Department estimates the rule could apply to about 3.6 million workers nationwide.
That possibility has sparked opposition from some employers and business interests over increased operational costs.
Under current federal regulations, so-called “white collar” employees earning at least $684 a week – equivalent to $35,568 annually – are generally exempt from receiving overtime pay.
The proposal is aimed at salaried employees, not manual laborers and other blue-collar workers who are typically paid by the hour and entitled to minimum wage and overtime pay regardless of income level.
Generally, employees covered by the federal Fair Labor Standards Act must receive overtime pay at a minimum of 1-1/2 times their regular pay rate when working more than 40 hours per week. Some states have their own overtime laws. In such instances, an employee is entitled to overtime pay at the higher standard.
Job classifications exempt from federal overtime pay requirements for salaried employees may include executive, administrative, professional, creative, computer, outside sales, and “highly compensated” positions.
The Labor Department’s current exemption threshold was enacted in 2019 during the Trump Administration and took effect in January 2020. It was a reduction from the $47,476 threshold established under the prior Obama Administration.
The current rules are no longer appropriate, said Acting Labor Secretary Julie Su, who called them “outdated and out-of-sync.”
“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,” Su said in a Wednesday news release.
“Today, the Biden-Harris administration is proposing a rule that would help restore workers’ economic security by giving millions more salaried workers the right to overtime protections if they earn less than $55,000 a year,” she said. “Workers deserve to continue to share in the economic prosperity of Bidenomics.”
Marc Freedman, vice president of workplace policy for the U.S. Chamber of Commerce, voiced opposition to the proposed rule.
“The Department of Labor’s proposed overtime regulation is the wrong rulemaking at the wrong time,” Freedman said in a Thursday statement.
Freedman said the proposal spikes the salary threshold by more than 50% and will increase costs for small businesses, nonprofits, and other employers at a time when businesses already face persistent workforce shortages that are hindering the economy.
“The proposed regulation also includes an automatic escalator clause that lacks statutory authorization and guarantees the salary threshold will become unworkable in just a few short years,” Freedman said. “The U.S. Chamber hopes that DOL heeds the comments and input from employers and makes significant changes in its proposal.”
In contrast, U.S. Sen. Patty Murray, D-Wash., issued a Thursday statement saying, “Workers should be compensated fairly when they work long hours; it’s that simple.”
“For too long, giant corporations have gone to great lengths to stiff their workers of the overtime wages they deserve, and that needs to end,” said Murray, senior member and former chair of the Senate’s Committee on Health, Education, Labor, and Pension.
“Democrats and the Biden-Harris administration are fighting back to protect workers by expanding overtime protections … This proposal is a huge step in the right direction and would make a meaningful difference for millions of hardworking people across America,” said Murray, who denounced the threshold reduction under the Trump administration.
Some critics of the rule say the proposed wage-threshold increase does not consider regional economic factors. A $55,000 annual wage might be considered “low” in major metropolitan areas, such as Los Angeles or New York, but relatively high compared to average wages paid in many rural parts of the country.
The Labor Department’s “Notice for Proposed Rulemaking” can be viewed at www.regulations.gov. It will be submitted for posting on the Federal Register, when it will be open to public comment for 60 days.
