The Biden administration’s Labor Department has proposed a new rule that would raise the salary cap for receiving overtime pay, a move that the agency says would grant millions more salaried workers time-and-a-half pay for every hour they work beyond 40 each week.
What is the proposed rule?
The plan would lift the threshold for salaried workers to receive overtime pay to $1,059 per week, which is around $55,000 annually, and would make an estimated 3.6 million more salaried workers like restaurant and grocery store department managers eligible for the paycheck boost.
Currently, salaried workers are required to be paid overtime if they make up to $35,568 or less, which has been the limit since the Trump administration raised it from $23,600 in 2019. President Obama previously tried to raise the limit to $47,476, but a judge blocked the move in 2016 under pressure from states and businesses.
The proposed rule would also update the salary threshold every four years based on wage growth data. The Labor Department said the rule would ensure that workers are fairly compensated for their long hours and protect them from being exploited by employers who classify them as exempt from overtime pay.
Why is the Biden administration pushing for this change?
The Biden administration said the proposed rule is part of its agenda to strengthen workers’ rights and boost their economic security. Acting Secretary of Labor Julie Su said in a statement announcing the proposal:
“For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones. 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. Workers deserve to continue to share in the economic prosperity of Bidenomics.”
The Labor Department also cited research that shows that raising the overtime threshold would benefit workers of color, women, and low-wage workers who are disproportionately represented among those who would gain overtime eligibility under the new rule. The agency said the rule would also create more jobs by encouraging employers to hire more workers or reduce hours for existing ones.
How are businesses and other stakeholders reacting to the proposal?
The proposed rule has received mixed reactions from different groups and sectors. Some labor unions and worker advocacy groups have praised the plan as a step forward for workers’ rights and dignity. For example, Mary Kay Henry, president of the Service Employees International Union, said:
“This is a huge win for millions of working people who have been putting in long hours during this pandemic without being paid fairly for their work. Expanding overtime pay will put more money in workers’ pockets, help them provide for their families, and boost our economy as we recover from COVID-19.”
However, some business groups and employers have criticized the plan as a costly and burdensome regulation that would hurt small businesses and stifle job growth. For instance, Chip Rogers, president and CEO of the American Hotel & Lodging Association, said:
“Small business owners continue to grapple with the rising costs of conducting business and inflationary pressures. If implemented, DOL’s proposal would result not only in crushing increases in labor costs for employers, but also significant tax hikes and administrative costs as well.”
The proposed rule is open for public comment until November 1, 2021. The Labor Department said it will review and consider all comments before issuing a final rule.