Labor Department Proposes Vast Expansion of Overtime Eligibility

In a move that could affect millions of workers, the Biden administration announced Wednesday that it was proposing to substantially increase the cutoff below which most salaried workers automatically receive time-and-a-half overtime pay.

Under the proposed rule, issued by the Labor Department, the cutoff for receiving overtime pay after 40 hours a week would rise to about $55,000 a year from about $35,500, a level that was set during the Trump administration.

About 3.6 million salaried workers who fall between the current cutoff and the new one would effectively gain overtime pay eligibility under the proposed rule, the department said. Some employers may choose to raise workers’ pay above $55,000 to avoid paying overtime.

Julie Su, the department’s acting secretary, said in a statement that the rule “would help restore workers’ economic security by giving millions more salaried workers the right to overtime protections.”

Some industry groups, particularly in retail, dining and hospitality businesses, have argued that expanded overtime eligibility could lead many employers to convert some salaried workers to hourly workers and cut their hourly wage to leave their overall pay unchanged.

These groups argue that vastly expanding overtime eligibility could also discourage employers from promoting workers to junior management positions that provide a path to well-paying careers, because more employers would be compelled to pay junior managers overtime when they work long hours.

The proposal follows a similarly ambitious move by the Obama administration in 2016, which sought to raise the overtime cutoff for most salaried employees to $47,500 from about $23,500. But just before Donald J. Trump took office as president, a federal judge in Texas suspended the Obama rule, concluding that the administration lacked the legal authority to raise the overtime cutoff so substantially.

The Trump administration later installed the current overtime limit of about $35,500.

Under the Biden administration’s proposal, the overtime limit would automatically adjust every three years to keep pace with rising earnings.