Millions of salaried workers will soon qualify for overtime pay under a final rule released by the US Department of Labor on Tuesday.
The new rule raises the salary threshold under which salaried employees are eligible for overtime in two stages. The threshold will increase to the equivalent of an annual salary of $43,888, or $844 a week, starting July 1, and then to $58,656, or $1,128 a week, on January 1, 2025.
About 4 million more workers will qualify for overtime when the rule is fully implemented in January, the agency estimates. In its first year, the rule is expected to result in an income transfer of about $1.5 billion from employers to workers, mainly from new overtime premiums or from pay raises to maintain the exempt status of some affected employees.
“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” acting Labor Secretary Julie Su said in a statement. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable.”
The current threshold is $35,568 a year, or $684 per week, which was put in place by the Trump administration in 2019.
The salary threshold will be updated every three years, starting July 1, 2027, the agency said.
Business groups are expected to fight the effort, as they successfully did when the Obama administration attempted to significantly hike the threshold. Trade associations quickly pushed back on the latest proposed rule when it was released in August, saying it would raise their members’ costs and hurt their operations.
“I suspect that such substantial increases may be a particular burden for many smaller businesses, forcing some to choose between cutting jobs and raising prices,” said Ted Hollis, a partner at Quarles & Brady, a law firm. “Some businesses that cannot do either may be forced to close, resulting in unintended but predictable side effects of this government action.”
The rule will “exponentially increase” operating costs for small restaurant owners who are “trying desperately” to keep menu prices steady, Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, said in a statement.
“And because DOL created a one-size-fits all rule based on national income data, rather than regional data, this change is going to disproportionately impact restaurant owners in the South and Midwest,” he said.
Ben Brubeck, vice president of regulatory, labor and state affairs at Associated Builders and Contractors, said the rule will disrupt the entire construction industry and noted that the trade group will consider all options, including a legal challenge. The rule will “greatly restrict employee workplace flexibility in setting schedules and hours, hurting career advancement opportunities,” he said in a statement.
In 2016, then-President Barack Obama asked the Labor Department to overhaul federal overtime rules and raise the salary threshold to $47,476 a year, or $913 a week. That would have roughly doubled the level that was in place at the time.
But business groups and 21 states sued, and later that year, a federal judge in Texas issued an injunction. The Trump administration said in 2017 that it would not defend the rule and later lifted the threshold to the current level.
This story has been updated with additional information.
