The U.S. federal government has recently finalized a new regulation that will benefit millions of workers who are eligible for overtime pay.
The U.S. Department of Labor announced a new regulation this Tuesday (April 23rd), stating that starting from July 1st of this year, employers must pay overtime to salaried workers who earn weekly wages below $844 or annual salaries below $43,888. By 2025, the wage threshold will increase to $1,128 per week or $58,656 per year.
Previously, only salaried workers earning weekly wages of $684 or less, or annual incomes of $35,568 or less, were eligible for overtime pay.
“Low-wage salaried workers often perform the same duties as hourly workers but spend more time away from their families without additional compensation. This is unacceptable,” said Julie Su, acting Secretary of Labor, in a prepared statement.
The Fair Labor Standards Act in the U.S. stipulates that most workers who work over 40 hours per week are entitled to 1.5 times their regular pay for extra hours worked. While this law mostly covers hourly workers, salaried employees are exempt from this unless their income falls below specific wage thresholds for eligibility for overtime pay. The new regulation introduced by the Labor Department lowers the threshold for overtime pay entitlement, expanding eligibility.
Hourly workers are those who are paid on an hourly basis and do not receive fixed salaries, a common practice in the U.S.
Salaried workers are employees who receive fixed payments or compensation from employers and are often engaged in administrative, managerial, and professional roles.
The new regulation also expands overtime eligibility for some high-wage hourly workers. Currently, the annual salary threshold for high-wage workers is $107,432, but under the new regulation, it will increase to $132,964 starting July 1st of this year and is expected to reach $151,164 by early 2025.
According to estimates by the Department of Labor, in the first year of implementation of the new regulation, around 4 million low-wage salaried employees will be newly eligible for overtime protection, while an additional 292,900 high-wage hourly workers are expected to gain overtime rights.
According to the Economic Policy Institute, the new regulation could result in an additional $1.5 billion in compensation for workers.
Critics of this regulation argue that it will harm their businesses and lead to job cuts. Some groups have even threatened legal action.
CBS reported that Kevin Carey, the interim chair of the American Hotel and Lodging Association (AHLA), expressed concerns in a statement, saying, “We are worried that many hotel operators have no choice but to eliminate management positions, which have long been established as a pathway for advancement.”
“AHLA is reviewing all available options, including legal action, to defeat this unwise regulation,” Carey stated.
Meanwhile, some advocates praise the government’s regulation, with some noting that this measure should have been implemented earlier.
Heidi Shierholz, President of the Economic Policy Institute (EPI), stated on Tuesday, “This rule is a significant milestone in creating a stronger and more equitable economy.”