The Department of Labor is proposing a new rule that would extend overtime pay protections for millions of workers—a decision that has businesses worried that it could result in staffing issues.
“The proposed rule would guarantee overtime pay for most salaried workers earning less than $1,059 per week, about $55,000 per year,” the department said in an Aug. 30 statement. Currently, only salaried employees making less than $35,568 per year are eligible for overtime pay.
The proposal is expected to extend overtime protections to 3.6 million more salaried workers.
The rule would include automatic updates to salary thresholds once every three years to reflect changes in earnings data and prevent future erosion of the protections.
“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.
“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.”
The current $35,568 threshold was set by the Trump administration, which was a bump from the earlier $23,660 level.
While the Obama administration had sought to double the $23,660 threshold, the attempt was blocked by a federal judge who ruled that the Labor Department exceeded its authority by raising the threshold too high.
Business leaders warned about setting the salary threshold of the overtime pay requirement at a high level as it could lead to small businesses facing staffing issues. Some may even decide to convert salaried workers to hourly ones.
Josh Ulman, spokesman for the Partnership to Protect Workplace Opportunity, said the group is “disappointed” by the overtime proposal.
“The DOL is proposing a nearly 55 percent increase to the minimum salary threshold. Massive increases in labor costs like this simply cannot be absorbed by businesses,” he said in a statement.
“Meanwhile, automatic increases are unlawful and will set up the economy for failure, as increases will occur regardless of economic circumstances, exacerbating any problems that may exist.”
Mr. Ulman warned that the rule would lead to a “substantial reduction” in access to entry-level administrative, executive, and professional salaried positions.”
In addition, “it will reduce opportunities, especially for recent graduates and younger professionals hoping to begin their careers.”
“President Biden and his Acting Labor Secretary Julie Su—who they haven’t put up for a vote in the Senate, because she doesn’t have the votes to be confirmed—are putting out a job-killing overtime rule that’s even more extreme than the one struck down by the courts when Obama tried it,” Sen. Mike Braun (R-Ind.) said in an Aug. 30 post on the social media platform X, formerly known as Twitter.
“At a time when businesses are cutting jobs just to avoid bankruptcy due to ‘Bidenflation,’ now is the worst time to make drastic changes that will lead some businesses to fire workers.”
Meanwhile, the Leadership Conference on Civil and Human Rights, a human rights coalition, welcomed the Labor Department’s proposal.
“We applaud @USDOL’s proposed rule to strengthen and expand overtime protections for more working people in America,” it said in an Aug. 30 post on X.
Overtime Pay Situation
According to the Fair Labor Standards Act (FLSA), almost all hourly workers in the United States are entitled to overtime pay once their work time exceeds 40 hours a week. The pay for overtime must not be less than one and a half times the regular rate.However, salaried employees who are engaged in administrative, executive, or professional rules are exempt from this overtime rule unless they earn below the salary threshold.
The Economic Policy Institute estimates that 15 percent of full-time salaried employees are currently entitled to overtime pay under the Trump-era policy, since they make less than the threshold. That’s lower than the more than 60 percent in the 1970s.
The Labor Department estimates that 27 percent of salaried workers would benefit from the new overtime pay rules.
The new proposal would also provide overtime pay protections in U.S. territories where the federal minimum wage is applicable.
The Labor Department estimates that the new rules would entitle around 300,000 manufacturing workers to overtime pay. A similar number of retail workers, 600,000 health care and social services workers, and 180,000 hospitality and leisure employees are also expected to benefit.
Manufacturers Oppose
Last year, the National Association of Manufacturers (NAM) warned that it may challenge an expansion in overtime coverage, pointing out that such measures would disrupt businesses at a time of labor and supply chain troubles. NAM is the largest manufacturing association in the United States.Robyn Boerstling, vice president of infrastructure, innovation, and human resources policy at the organization, said that NAM has provided comments to authorities regarding exemptions for overtime pay rules for “certain executive, administrative, professional, outside sales, and computer employees,” according to an Aug. 1 post on NAM’s website.
Manufacturing employees on average make $92,832 in pay and benefits, she stated.
During a public listening session in April, Ms. Boerstling told the Labor Department that her organization “urges caution in any effort to expand overtime exemptions as manufacturers believe adjustments would be disruptive in a challenging economic and workforce environment.”
“The manufacturing workforce has tremendous autonomy and latitude in this labor market to address pay and compensation issues directly with their employers.”
