The Biden administration has taken a bold step towards addressing wage inequality in the United States by finalizing a new rule that will significantly expand overtime eligibility for salaried workers. This move marks a substantial departure from the current threshold of $35,568, which was set under the Trump administration in 2019.
Effective July 1, employers will be obligated to pay overtime to salaried workers who earn less than $43,888 annually in certain executive, administrative, and professional roles. This threshold will gradually increase to $58,656 by the start of 2025. This adjustment aligns with the Labor Department’s methodology for updating salary thresholds, which considers the latest wage data and will be implemented every three years.
The new rule also extends overtime eligibility to some highly compensated workers. The current annual threshold of $107,432 for highly compensated workers will increase to $132,964 on July 1 and $151,164 by the start of 2025. This measure is expected to benefit 292,900 higher-paid workers.
The Labor Department estimates that over 4 million lower-paid salaried workers who are currently exempt from overtime protections will become eligible under the new rule. This expansion recognizes the reality that many salaried workers are performing the same duties as their hourly counterparts but are not receiving appropriate compensation for overtime hours worked.
Critics of the new regulation argue that it could saddle companies with additional costs and exacerbate labor challenges. However, advocates applaud the move, emphasizing that the overtime threshold has not been adequately updated in almost 50 years. The Economic Policy Institute notes that this change is essential for valuing workers’ time and creating a more equitable economy.
