New Overtime Rules Will Boost Eligibility For Millions of Workers

The Biden Administration has finalized a new rule increasing the population of the U.S. workforce eligible for overtime pay. Historically, salaried workers have generally not had access to overtime pay like hourly and shift workers. This rule mandates eligibility for certain salaried workers to receive overtime pay.

Expansive Regulatory Change

This Administrative action is one of the most expansive regulatory changes regarding overtime pay in recent history. The rule will take effect July 1.

Impact Estimates

The Department of Labor calculates that four million salaried workers will newly qualify for overtime pay starting this year, with just under 300,000 higher-salary workers also becoming eligible.

New Overtime Eligibility Thresholds

In the coming months, workers whose salaries amount to less than $43,888 annually must receive overtime compensation for the first time. In the past, if an employee was categorized as an “executive, administrative, or professional (EAP),” they were not eligible for overtime pay.

Salary threshold to Be Increased and Reevaluated Incrementally

In 2025, the threshold will increase further to $58,656. The Department of Labor will reevaluate the pay threshold every three years moving forward.

Mechanics of Overtime Pay Protections

Federal law covers overtime pay protections in the Fair Labor Standards Act (FLSA). Under this law, hourly employees who work over 40 hours per week get paid a premium 1.5 times their base pay for any hours worked over 40 hours.

The Trump Administration originally made this pay structure mandatory for lower wage salaried employees, and the Biden Administration has taken this regulation even further to qualify more individuals with higher salaries.

Labor Department’s Statement

Acting Labor Secretary Julie Su stated that salaried workers were not compensated for their extra hours worked, unlike their colleagues who work on an hourly basis. This rule changes that.

Rule Comes on the Heels of Banning Noncompetes

The Department of Labor has recently rolled out several regulations to increase labor equality, an objective of the Biden Administration. The Department also recently released a rule banning the enforcement of noncompete agreements for almost all industries except for non-profits.

Background on Overtime Thresholds

Such regulations requiring overtime pay for salaried employees already exist, but this rule would increase the annual salary threshold, making employees eligible for the mandated overtime pay. The original pay threshold of $35,568 was set during the Trump Presidency in 2019. This rulemaking expands on that initiative.

Opposition and Criticism

The new Labor rule has been criticized by some of the business community as well as some Republican politicians such as Representative Virginia Foxx (R-NC), who calls the initiative “excessive and heavy-handed.” According to this perspective, the new regulations will negatively impact employers’ bottom line and increase consumer costs.

Support from Advocates

Labor advocates, on the other hand, have lauded the move from the Administration, emphasizing that the ruling will force employers to adequately compensate employees for all the hours given to the company.

Impact on Expectation on Addition Time Spent at the Office

Some employees complain about the expectation of excess uncompensated time spent at the office to be noticed for advancement. This works against parents or employees with responsibilities beyond their salaried position who may not be free to spend extra hours on the job like their less encumbered colleagues.

Impact on “Creep” Within Job Descriptions and Expectations

Additionally, the salaried position can often serve as cover for job description creep, where employers foist additional work on an employee that the employee may not be able to complete within the salaried hours, forcing the employee to spend additional uncompensated hours at the office to complete extra tasks not able to be completed within the regular workday hours.

Impact on Employee’s Total Well-Being

The new rule could be a boon to employee’s total well-being, as it would turn the tide from employers incentivizing extra time spent at the office to urging employees to go home at the end of the work day.