Millions of salaried workers to become eligible for overtime under new Biden rule

WASHINGTON — The U.S. Department of Labor Tuesday announced a final rule that means millions of salaried workers who are employed in the executive, administrative or professional industries will become eligible for overtime pay.

The rule will affect roughly 4 million workers in the first year of implementation and will be broken into two checkpoints. The first will be on July 1, with an impact on 1 million workers, and another on Jan. 1, 2025, affecting 3 million workers, Wage and Hour Division Administrator Jessica Looman said on a call with reporters previewing the regulation.

On July 1, the agency will update standard salary levels using an existing methodology developed under the Trump administration, Looman said. The salary level at which salaried employees are exempt from overtime will rise at that point from $684 per week to $844 per week, which is the equivalent of $43,888 per year.

On Jan. 1, the agency will move to a new methodology that will set the standard salary level to the 35th percentile of “full-time salaried workers in the lowest-wage census region, which is the South,” Looman said.

That will result in an exempt salary level of $1,128 per week, or the equivalent of $58,656 per year.

“The strength of these protections continues to decline over time, and sometimes workers are working excessive hours with no additional pay,” Looman said, adding that some workers are exempt from protections under the Fair Labor Standards Act.

President Joe Biden, in a video, said, “We’re putting more money in the pockets of millions of American workers. Because you earned it.”

The Department of Labor has typically updated the salary requirement levels every five to nine years since 1938, but after 1975, those updates have been more unpredictable. Salary levels have not been updated in at least four years.

Solicitor of Labor Seema Nanda said on the call with reporters that DOL has tried to “strike the right balance between the salary level and the duties,” and that “striking the wrong balance means that lower-paid salary workers don’t get the overtime protections that they should under the act.”

Future updates to the salary level will occur every three years, and will apply “up-to-date wage data to the salary and compensation methodologies in the regulation at the time of the update,” Looman said.

The next update will take place on July 1, 2027.

The Labor Department included exemptions to the new standards, including in U.S. territories.

“The final rule does not finalize proposals to raise the salary threshold for workers in the four U.S. territories that are currently subjected to the federal minimum wage, which are Puerto Rico, Guam, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands,” Looman said. “The rule also doesn’t finalize updates to the special salary levels for American Samoa and the motion picture industry in relation to the new standard salary level.”

DOL will address those updates in a future final rule, she said.

“The final rule announced today restores and extends overtime protections to lower paid salary workers and prevents a future erosion of overtime protections while ensuring greater predictability,” Looman said.