Millions of Americans could start paying overtime thanks to a new reform by the Biden administration.
The Labor Department announced on Wednesday that it is proposing a long-awaited proposal federal rule This would extend overtime protection to more workers. If the rule were implemented, another 3.6 million workers would be entitled to an hour-and-a-half wage if they work more than 40 hours a week, the agency said.
The rule would achieve this mainly by raising the so-called overtime wage threshold – the salary below which workers have a legal right to overtime pay regardless of their job duties. The current rate is only $35,558 per year. The government wants to increase the amount to $55,068. The rule would also link the threshold to an inflation index, meaning it would be increased every three years.
Under current law, hourly workers are already entitled to overtime pay. The new regulation would only affect employees.
The Labor Department estimates the proposal would net workers $1.3 billion in additional wages. However, the reform is likely to lead to a legal challenge from employers’ organizations, leaving its fate uncertain.
Julie Su, the acting labor minister, called the 40-hour workweek a “cornerstone of workers’ rights” when announcing the new rule.
“I’ve heard from workers over and over that they work long hours and don’t get any extra pay while at the same time earning low wages that far from compensate them for their sacrifices,” Su said in a statement on Wednesday.
The low wage threshold has meant that many workers can work long hours without overtime pay as long as their wages are above the statutory minimum wage. A classic example would be a dollar store manager who might work 70 hours a week and not receive any additional pay for those 30 hours over and above the standard workweek.
“I’ve heard from workers time and time again that they work long hours, without additional pay, and all for low wages.”
– Acting Secretary of Labor Julie Su
Democrats and liberal economists have been calling for raising the threshold so more workers are eligible for the supplement for years. This would both increase wages and discourage employers from forcing workers to work overtime, the reasoning goes.
The move revives a policy by former President Barack Obama, who tried to raise the salary threshold from $23,660 to $47,476 in 2016. Businesses have successfully sued to prevent implementation of the plan, and the Trump administration later watered down the Obama proposal, setting a new threshold near $35,500 fewer workers would benefit.
The Labor Department said the proposal would also help clarify who should be exempted from overtime pay, which would make it harder for employers to exclude workers from the protections.
Drew Angerer via Getty Images
As was the case during the Obama years, the Biden proposal was quickly embraced by Democrats and labor representatives and rejected by business groups and Republicans.
Rep. Virginia Foxx (RN.C.), chair of the House Education and Labor Committee, called the plan “misguided and partisan.”
“This rule will limit flexibility in the workplace, transfer onerous costs to job creation and ultimately hold back the very people DOL should support most – working Americans,” Foxx said in a statement.
But the Economic Policy Institute, a left-leaning think tank that advocates expanding overtime, called the Biden proposal “modestly and within the bounds of historical precedent.”
“The overtime threshold has not been properly updated for nearly 50 years, depriving millions of workers of their basic wage and hour rights,” said the group’s chair Heidi Shierholz, who previously served as the Labor Department’s chief economist.
