Biden Administration Expands Overtime Pay

Biden Administration Expands Overtime Pay

On April 23, 2024, the U.S. Department of Labor announced a final rule that will extend overtime pay to millions of salaried workers who earn less than $1,128 per week, or $58,656 annually. Previously, only workers who made $684 or less each week, or $35,568 annually, were eligible for overtime. The new rule is effective July 1, 2024.

The Fair Labor Standards Act requires businesses to pay workers 1.5 times their pay if they work more than 40 hours a week, but that protection has been limited to hourly workers and lower-earning salaried employees. Because of the above-mentioned salary cutoff, many salaried workers were performing the same duties as their hourly coworkers, but were not able to qualify for overtime.

The Biden administration's new rule could result in an additional $1.5 billion in pay for employees, according to an estimate from the Economic Policy Institute. The move marks the largest expansion in federal overtime eligibility seen in decades.

 Who is Covered by the New Rule:

Under the new rule, overtime pay is not available to salaried workers who are considered "executive, administrative or professional" employees. The new rule requires that only "bona fide" executive, administrative, or professional employees are exempt from the expanded overtime rule-regardless of an employee's job title.

The new rule also defines "bona fide" executive, administrative, or professional employees as subject to a three part test:

  1.  the employee must be paid a predetermined and fixed salary that is not
    subject to reduction because of variations in the quality or quantity of
    work performed;
  2.  the amount of salary paid must meet a minimum specified amount; and
  3.  The employee's job duties must primarily involve executive,
    administrative, or professional duties as defined by the regulations.

The employer bears the burden of establishing the applicability of the exemption. Job titles and job descriptions do not determine exemption status, nor does merely paying an employee a salary.

Key provisions of the final rule:

  • Expanding overtime protections to lower-paid salaried workers; 
  • Giving more workers pay or valuable time back with their family: By better identifying which employees are executive, administrative or professional employees who should be overtime exempt, the final rule ensures that those employees who are not exempt receive time-and-a-half pay when working more than 40 hours in a week or gain more time with their families.
  • Providing for regular updates to ensure predictability. The rule establishes regular updates to the salary thresholds every three years to reflect changes in earnings. This protects future erosion of overtime protections so that they do not become less effective over time.

Because many immigrants work in lower-paid salaried positions, the new rule is expected to benefit such workers. The Labor Department estimates that 4 million lower-paid salary workers who are exempt under current regulations will become eligible for overtime protections in the first year under the new rule. An additional 292,900 higher-compensated workers are also expected to get overtime entitlements. (Source: Associated Press).

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