The Labor Department on Thursday released its long-awaited proposal to rewrite the federal rule on overtime pay, saying that it should cover workers earning up to $35,000 annually, from the current level of $23,000. The proposal, if enacted, would formally overturn an Obama administration effort to set the cut-off at $47,000.
“Our economy has more job openings than job seekers, and more Americans are joining the labor force,” said Labor Secretary Alexander Acosta. “At my confirmation hearings, I committed to an update of the 2004 overtime threshold, and today’s proposal would bring common sense, consistency, and higher wages to working Americans.”
The Fair Labor Standards Act says employees must be paid time-and-a-half once they work more than 40 hours in a week. However, businesses may exempt workers from the requirement if their duties are “managerial” in nature and they reach a certain salary threshold. Under the Obama administration, the Labor Department released a rule raising the level to $47,000 in 2016, more than double its prior level. The administration argued that the old rule was outdated and widely abused by employers.
“In 1975, more than 60 percent of full-time salaried workers earned below the [$23,000] threshold. By 2016, the share of workers covered had dropped to less than 7 percent,” said Heidi Shierholz, a former Labor Department economist during the Obama administration, now with the nonprofit Economic Policy Institute.
Business groups opposed the increase, saying it was too high and would force many businesses to cut back on offering overtime at all. A federal court prevented the Labor Department from enforcing it, however, and the Trump administration opted to rewrite the rule instead.
In his confirmation hearings and in congressional testimony since then, Acosta has said that while the old threshold was too low, the Obama effort pushed it too high. Thursday’s announcement effectively splits the difference between the two. It still has to go through a 60-day public comment period before it can be adopted.
Business groups applauded the announcement. “This move gives business owners across the country the clarity and certainty needed to plan for their future, and many employees more money in their pocketbook,” said Matt Haller, senior vice president for government relations at the International Franchise Association. “We look forward to supporting [the agency] to see that this rule moves forward as swiftly as possible.”
