Biden Administration Revives Obama-Era Overtime Pay Policy, Affecting 3.6 Million U.S. Workers

(CTN News) – The Biden administration is set to introduce a fresh regulation on Wednesday, aiming to extend overtime pay eligibility to an additional 3.6 million American workers. This move marks a revival of an initiative from the Obama era that had been derailed by legal challenges.

As outlined in a preview provided to The Associated Press prior to the official announcement, the proposed regulation would necessitate employers to provide overtime compensation to white-collar workers, often referred to as salaried employees, whose annual earnings fall below $55,000.

This figure is a significant increase from the previous threshold of $35,568, which had been established in 2019 by the Trump administration, superseding the prior level of $23,660.

Proposed Overtime Pay Expansion: Automatic Adjustments, Impacted Industries, and Potential Challenges

Notably, the new rule also introduces a provision for automatic annual adjustments to the salary threshold.

Advocates for labor rights and progressive lawmakers have persistently advocated for a robust expansion of overtime safeguards, given the substantial erosion of these protections over recent decades due to factors such as stagnant wages and inflation.

The proposed rule, though it will be open to public commentary before potentially being enacted in several months, would have the most pronounced impact on industries like retail, food service, hospitality, manufacturing, and others wherein a considerable number of managerial employees would now meet the revised eligibility criteria.

Acting Secretary of Labor Julie Su conveyed, “I have repeatedly heard from workers about their extended work hours without commensurate extra compensation, all while receiving meager salaries that fail to adequately acknowledge their sacrifices.”

Her statement underscores the motivation behind this proposed regulatory change.

The potential resistance from business coalitions, which previously mounted a successful legal counter to a comparable regulation proposed by then-Vice President Biden during the Obama administration, might pose a challenge to the implementation of this new rule.

In that earlier attempt, Biden had aimed to elevate the threshold to over $47,000.

However, the current proposition also falls short of the aspirations of certain progressive lawmakers and labor unions, who advocated for an even higher salary benchmark than the proposed $55,000.

Proposed Changes to Overtime Pay Eligibility and the Impact on Salaried Workers in the United States

As per the Fair Labor Standards Act, nearly all hourly employees in the United States are entitled to receive overtime pay after exceeding 40 hours of work in a week, at a rate not less than one and a half times their usual pay.

Nonetheless, salaried workers engaged in executive, administrative, or professional roles are exempt from this requirement unless their earnings fall below a specific level.

The Economic Policy Institute, which leans toward a more left-leaning perspective, approximates that around 15% of full-time salaried workers are currently eligible for overtime pay under the regulations set during the Trump administration.

This is a significant drop from the over 60% figure observed in the 1970s.

With the implementation of the proposed new rule, the Labor Department forecasts that approximately 27% of salaried workers would qualify for overtime pay due to their earnings falling below the newly established threshold.

Advocates of the business community contend that establishing a high salary prerequisite could potentially exacerbate staffing difficulties for small enterprises.

Additionally, this could prompt many companies to transition salaried staff to hourly roles in order to closely monitor their work hours.

Businesses that had previously contested the Obama-era rule had commended the balanced approach of the Trump administration’s policy, whereas progressive factions indicated that it disregarded the rights of millions of workers.

Proposed Changes to Overtime Salary Threshold and Potential Impact on Various Industries

A coalition of Democratic legislators had called on the Labor Department to elevate the salary threshold to $82,732 by 2026, aligning it with the 55th percentile of earnings for full-time salaried workers.

A senior official from the Labor Department stated that the new rule would align the threshold with the 35th percentile of earnings for full-time salaried workers.

This figure surpasses the 20th percentile in the current regulation but remains below the 40th percentile proposed in the previous Obama-era initiative.

In the past year, the National Association of Manufacturers issued a warning, expressing potential intentions to contest any expansion of overtime coverage.

The association argued that such alterations could disrupt operations during a period marked by persistent challenges in supply chains and labor availability.

Under the provisions of the new rule, an estimated additional 300,000 workers in the manufacturing sector would become eligible for overtime pay, according to assessments by the Labor Department.

A similar number of employees in the retail sector would also qualify, along with around 180,000 individuals working in the hospitality and leisure industry. Furthermore, approximately 600,000 workers in the health care and social services domain would be affected.