The Biden Administration Proposes Increase in Overtime Pay Threshold

The Biden administration is seeking to raise the threshold for overtime pay for salaried workers. Currently set at $35,500 per year, the proposed rule from the Department of Labor would increase the cutoff to about $55,000 annually. This change would affect approximately 3.6 million salaried workers who fall between the current cutoff and the new one.

The purpose of this proposal is to provide economic security and overtime protections to more salaried workers. Julie Su, the acting secretary of the Department of Labor, believes that the rule would help restore workers’ economic security by giving millions more the right to overtime pay.

While this change would benefit many workers, some industry groups, particularly in retail, dining, and hospitality, have expressed concerns. They argue that expanding overtime eligibility may lead employers to convert salaried workers to hourly workers and cut their wages to compensate for the additional overtime pay.

These groups also note that significantly expanding overtime eligibility could discourage employers from promoting workers to junior management positions that offer pathways to well-paying careers. Employers would be more inclined to pay junior managers overtime for their long hours, which could be financially burdensome.

It is important to highlight that this proposal follows a similar attempt made by the Obama administration in 2016. However, the rule was suspended by a federal judge just before President Donald J. Trump took office. The Trump administration then established the current overtime limit of approximately $35,500.

Under the new proposal, the overtime limit would be adjusted every three years to keep up with rising earnings. This automatic adjustment seeks to ensure that salaried workers are fairly compensated for their hours worked.

Overall, the Biden administration’s proposed increase in the overtime pay threshold aims to expand workers’ rights and economic security. However, discussions and debates are expected to continue within industry groups and among employers regarding the potential impact and implications of this change.