More than 3 million workers would be newly eligible for overtime pay when they work more than 40 hours a week, under a new proposal from the US Department of Labor.
(Bloomberg Law) — More than 3 million workers would be newly eligible for overtime pay when they work more than 40 hours a week, under a new proposal from the US Department of Labor.
The highly-anticipated proposed rule, announced Wednesday by the Biden administration, would expand time-and-a-half pay protections to more workers by changing the exemptions to overtime eligibility under the Fair Labor Standards Act, a change that it says will boost workers’ economic security. But business groups already are pushing back on whether it will achieve those goals.
“We are committed to ensuring that all workers are paid fairly for their hard work,” Principal Deputy Wage and Hour Division Administrator Jessica Looman said in a press release on the rule. “For too long, many low-paid salaried workers have been denied overtime pay, even though they often work long hours and perform much of the same work as their hourly counterparts. This proposed rule would ensure that more workers receive extra pay when they work long hours.”
Workers who are salaried, make more than a certain amount of money per year, and work in a “bona fide executive, administrative, or professional capacity” aren’t covered by requirements for employers to pay employees at a time-and-a-half rate for any time they work beyond 40 hours in a week. Employees must meet all three of these factors for the exemption to apply.
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The Biden administration proposal would raise the salary piece of the test to ensure workers making less than about $55,000 annually are automatically owed overtime pay, a bump from the current level of $35,568. The threshold would then update every three years. The change is expected to provide an additional 3.6 million workers with the right to time-and-a-half pay whenever they work more than 40 hours a week, according to the DOL.
Democrats and worker advocates praised the release of the proposal, saying it will help fuel economic growth.
“Once again, the Biden Administration is listening to workers’ voices by taking these much-needed steps to strengthen overtime protections,” Rebecca Dixon, President and CEO of the National Employment Law Project, said in a written statement. “Ensuring this proposed rule is finalized and implemented as soon as possible is essential because workers don’t deserve to wait any longer for the benefits this rule will provide.”
Critics Weigh In
Business groups that would see increased payroll costs under the rule change are expected to challenge the final version of the measure, especially given potential guardrails set by previous litigation involving past overtime regulations.
“The Administration’s proposed threshold is well above the rate of inflation,” The National Retail Federation said in a written statement in response to the rule. “We’re not convinced that such an increase is warranted at this time. Secondly, we questioned the department’s authority to attempt to tie the hands of future administrations through automatic increases.”
The Associated Builders and Contractors said the proposed rule could undermine any economic stability industries like construction could achieve going forward. “It is unfortunate that the DOL did not listen to our repeated requests to abandon or postpone issuance of the proposed overtime rule until the current economic situation stabilizes or improves, allowing employees and employers to fully navigate the paradigm shift of work in America without new unnecessary and costly red tape,” Ben Brubeck, ABC vice president of regulatory, labor and state affairs, said in a statement.
An effort by the Obama administration to raise the salary threshold of the overtime test to $47,476, which would have offered new overtime protections to millions, was blocked in federal court in 2017. The Texas-based US district court found that the Obama-era salary threshold was set so high it made the job duties piece of the exemption test irrelevant, and expanded protections to workers Congress sought to exclude.
That ruling could be used as ammunition against the latest proposal from the Biden administration, if a court could similarly be convinced that the new threshold crowds out other parts of the test. The DOL’s latest proposal doesn’t include any major changes to the job duties provisions.
The proposal is likely to be met with praise from Democrats and worker advocates who had been pressing the administration to expand overtime protections to more workers, but doesn’t go as far as setting the salary threshold to $82,732 as some had suggested.
Once the proposal is officially published in the Federal Register, the public will have 60 days to submit input on the potential changes.
To contact the reporter on this story: Rebecca Rainey in Washington at rrainey@bloombergindustry.com
To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com
(Updated with reaction to the rule throughout.)
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