The Biden administration accomplished a new rule set that would make millions more salaried workers eligible for overtime pay in the United States.
The measure represents the largest increase in federal overtime eligibility in decades.
New Biden Rule to Grant Overtime Pay to Salaried Workers
Employers will be obliged to pay overtime to salaried workers earning less than $43,888 per year in some executive, administrative, and professional tasks beginning July 1, according to the Labor Department. The cap will then rise to $58,656 by the beginning of 2025.
Tuesday's announcement represents a significant increase from the current overtime eligibility threshold of $35,568, which was established by the Trump administration in 2019 - just three years after a more generous Obama-era effort was ultimately thwarted in court due to opposition from some business leaders and Republican politicians.
Under federal law, practically all hourly workers in the United States are eligible to overtime pay after 40 hours per week.
However, many paid workers are immune from this need - unless their earnings fall below a particular threshold, according to AP News.
The new rule also extends overtime eligibility to some highly compensated workers. According to a Labor Department FAQ, the current $107,432 yearly barrier for highly compensated workers will rise to $132,964 on July 1 and $151,164 by the beginning of 2025.
According to the Labor Department, four million lower-paid salaried workers who are currently free from overtime protections will become eligible in the first year of the new rule. An additional 292,900 higher-paid workers are projected to get overtime pay.
Employers May Avoid Paying Overtime
Some employers may raise employees' basic salary to the new threshold in order to avoid paying overtime, or they may convert salaried staff to hourly employees who must punch a clock.
Others could order paid staff to work no more than 40 hours per week, relying on part-time workers to fill the gaps. Others may lower employees' base pay to cover overtime, essentially avoiding the new requirement.
The initial increase in the salary threshold to $43,888, which goes into effect on July 1, is based on a Trump administration calculation that sets it at the 20th percentile of full-time weekly wages of salaried employees in the lowest-wage region, currently the South.
The hike to $58, 656 on January 1 follows a revised formula that establishes the threshold at the 35th percentile of those weekly wages, USA Today reported.
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