New Overtime Policy Boosts Pay for Millions of Salaried Workers: What You Need to Know

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The Labor Department has unveiled a significant change to the federally mandated overtime policy, promising extensive pay reforms for salaried workers across various domestic industries. Starting July 1, employers must pay overtime to salaried workers earning under $43,888. In a subsequent phase in 2025, this threshold will increase to $1,128 per week or $58,656 per year.

Impact on Salaried Workers

The July 1 increase is a considerable jump from the 2020 cap of $35,568, which had remained low under the previous administration. This change will impact a significant portion of the workforce. The Economic Policy Institute (EPI) estimates that 4.3 million salaried employees will now receive pay for overtime hours, compensating for long hours previously worked without additional pay.

Historical Context and Existing Protections

Since the 1938 Fair Labor Standards Act (FLSA), waged workers have been entitled to overtime pay of at least time and a half for working over 40 hours a week. However, salaried employees, often classified under “white-collar” exemptions, have been exploited by being required to work additional hours without extra pay.

  

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Current Policy Shift

The latest policy change, announced on April 26, aims to rectify these issues. Effective July 1, the salary cap for mandatory overtime pay will increase to $43,888 annually. Furthermore, the threshold will rise again on January 1, 2025, to $58,656 per year. This rule also increases the highly compensated employee (HCE) threshold to $132,964 as of July 1, 2024, and to $151,164 starting January 1, 2025. Future adjustments will occur every three years to keep the policy updated.

Long Overdue Reforms

U.S. employers have long used exemptions to exploit salaried workers. The FLSA established critical labor protections, including mandatory overtime, minimum wage, and rules against child labor. However, corporate interests have continually attempted to undermine these protections.

Case Study: Exploitation of Salaried Workers

AJ, a former corporate employee, shared his experiences of being overworked without overtime pay. Despite being paid about $38,000 annually, his role demanded round-the-clock availability and extensive travel, resulting in burnout and financial instability.

Future Prospects and Challenges

The new overtime policy represents a significant shift, expected to benefit 4.3 million workers, including many women and workers of color. However, business interests, represented by groups like the U.S. Chamber of Commerce, have opposed the changes, citing potential harm to small businesses.

The Labor Department’s updated overtime policy is a long-awaited reform that promises to improve living standards for millions of U.S. workers. Despite potential political challenges, the policy’s periodic reassessment could ensure sustained protections for salaried employees.