WASHINGTON — The U.S. Department of Labor on Tuesday announced a final rule that means millions of employees in managerial, administrative or professional positions will be entitled to overtime pay.
The rule will affect about 4 million workers in the first year of its implementation and will be divided into two checkpoints. The first will come into force on July 1 and will affect 1 million workers, the second on January 1, 2025, which will affect 3 million workers, said Jessica Looman, head of the wages and hours department, in a phone call with journalists presenting the rule.
On July 1, the agency will update standard pay levels using an existing methodology developed under the Trump administration, Looman said. The pay level at which employees are exempt from overtime will increase from $684 per week to $844 per week at that time, or $43,888 per year.
On Jan. 1, the agency will switch to a new method that sets the standard salary level at the 35th percentile of “full-time employees in the census region with the lowest wages, which is the South,” Looman said.
This results in a tax-free salary of $1,128 per week, or the equivalent of $58,656 per year.
“The effectiveness of these protections diminishes over time, and sometimes workers work excessive hours without additional pay,” Looman said, adding that some workers are exempt from protections under the Fair Labor Standards Act.
President Joe Biden said in a video: “We're putting more money in the pockets of millions of American workers. Because they deserve it.”
Since 1938, the U.S. Department of Labor has typically updated salary requirements every five to nine years. However, since 1975, these updates have become more unpredictable. Salaries have not been updated in at least four years.
Labor lawyer Seema Nanda said in a phone call with reporters that the Labor Department has tried to “find the right balance between pay levels and duties” and that “finding the wrong balance results in low-wage workers not receiving the overtime protections they are entitled to under the law.”
Future salary level updates will occur every three years and will “apply current wage data to the salary and compensation methods in effect in the rule at the time of the update,” Looman said.
The next update will be on July 1, 2027.
The Department of Labor has allowed exceptions to the new standards, including for U.S. territories.
“The final rule does not provide any final proposals to increase the salary threshold for workers in the four U.S. territories currently subject to the federal minimum wage, namely Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands,” Looman said. “The rule also does not provide any final updates to the special salary levels for American Samoa and the motion picture industry relative to the new standard salary level.”
The DOL will consider these updates in a future final rule, she said.
“The final rule announced today restores and expands overtime protections for low-income workers, prevents future erosion of overtime protections, and at the same time provides more predictability,” Looman said.
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