As of July 1, salaried workers in the U.S. who make less than $43,888 a year – or $841 a week – must receive overtime pay if they work more than 40 hours under a new Biden administration rule.
As of Jan. 1, 2025, the new overtime exemption threshold will climb to $58,656 a year, or $1,128 a week.
The final U.S. Department of Labor (DOL) rule was released on Tuesday, April 23. It updates the current annual salary threshold of $35,568 or $638 a week. Under the administration’s rule, 4.3 million additional Americans would be eligible for overtime pay.
In addition, the rule adjusts the threshold for highly compensated employees. Starting July 1, 2027, those thresholds will be updated every three years. It will be done “by applying up-to-date wage data to determine new salary levels,” a DOL news release said.
Court challenges are likely for changes that go beyond rules previously set by the Obama administration rule. It increased salary thresholds for employees and required them to be paid time and half for every hour they work over 40 in a week.
Those 2016 rules would have more than doubled the threshold for overtime pay to $47,476 a year, or $913 per week. Opponents challenged the change. They argued that President Obama exceeded his authority under the Fair Labor Standards Act. Federal courts granted an injunction against the rule and the Trump administration did not challenge it.
QC opposes rule
Key Republican leaders, including U.S. Senator Bill Cassidy, R-Louisiana, are also blasting this week’s change. They say it will hike employer overtime costs by 65%, eliminate jobs and raise prices on families.
“Americans continue to feel the effects of Bidenomics as they struggle to make ends meet. This policy throws gasoline on the fire,” Dr. Cassidy said in a news release. “The new overtime rule forces businesses to make a choice: eliminate jobs, gut wages, or raise prices on families already feeling the affordability crunch under President Biden.”
The Quad Cities Chamber was among the 33,000 businesses, organizations and individuals who submitted comments last September. Now that the rule has been finalized, Ryan Sempf, the chamber’s executive director of government affairs, said the organization is concerned about its impact on the region.
Hike brings headaches
“The U.S. The Department of Labor’s decision to drastically increase the wage threshold for overtime exempt employees will create headaches and costly administrative burdens on nearly all employers in the Quad Cities,” he told the QCBJ. “This decision will only serve to create uncertainty for employers and discourage investment in the short-term.”
Even as businesses brace for the that impact, those who championed the change are celebrating this week’s news.
“We are thrilled to see the final rule issued to update overtime protections under the Fair Labor Standards Act,” Economic Policy Institute President Heidi Shierholz said in a news release. “This action is projected to give overtime protections to 4.3 million workers and increase the wages of working people by $1.5 billion annually. Further, the rule is an important step toward correctly valuing one of the most precious resources workers have — their time.”
She called the rule “an essential milestone in creating a stronger, fairer economy.” The EPI also argued that the higher threshold ensures employers “have skin in the game” when they ask employees to work long hours.
The rule’s effective date is July 1. Learn more DOL’s overtime protections here.
