NEW YORK — The Biden administration proposed a brand new rule Wednesday that may make 3.6 million extra U.S. employees eligible for extra time pay, probably the most beneficiant such enhance in a long time.
The rule revives an Obama-era effort that confronted robust pushback from enterprise leaders and Republicans and was in the end scuttled in court docket. Labor advocates and liberal lawmakers have pushed the Biden administration to take the combat again up, arguing that extra time protections have been sharply eroded over the a long time by wage stagnation and inflation.
The proposed regulation, unveiled by the Department of Labor, would require employers to pay extra time to salaried employees who’re in skilled, administrative {and professional} roles however make lower than $1,059 every week, or $55,068 a yr for full-time workers. That wage threshold is up from $35,568 stage that has been in place since 2019 when Trump administration raised it from $23,660, in a extra modest enhance than President Barack Obama’s earlier proposal.
The rule, which is topic to a public commentary interval and wouldn’t take impact for months, would have the most important influence on retail, meals, hospitality, manufacturing and different industries the place many managerial workers meet the brand new threshold.
“I’ve heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don’t come anywhere close to compensating them for their sacrifices,” performing Secretary of Labor Julie Su stated in a ready assertion.
The new rule is for certain to face criticism from enterprise teams that mounted the profitable authorized problem towards related regulation that Biden introduced as vp throughout the Obama administration, when he sought to lift the brink to greater than $47,000. But it additionally falls wanting the calls for by some liberal lawmakers and unions for an excellent increased wage threshold than the proposed $55,000.
Under the Fair Labor Standards Act, virtually all U.S. hourly employees are entitled to extra time pay after 40 hours every week, at at least time-and-half their common charges. But salaried employees who carry out government, administrative or skilled roles are exempt from that requirement except they earn under a sure stage.
The left-leaning Economic Policy Institute has estimated that about 15% of full-time salaried employees are entitled to extra time pay below the Trump-era coverage. The new rule would virtually double that to just about 30%, in keeping with Labor Department figures.
That’s nonetheless fewer than the greater than 60% of salaried employees who had been entitled to extra time pay within the Nineteen Seventies, in keeping with the liberal Economic Policy Institute. The extra time rule has solely been sporadically up to date over the previous a long time, with the Trump enhance being the primary since 2004. The Labor Department’s new rule makes an attempt to vary that sample by adopting automated will increase to the wage threshold each three years.
“This is long overdue. It’s decades overdue, and it’s really important step,” stated Economic Policy Institute Heidi Shierholz, who was the chief economist on the Labor Department when the Obama administration tried to enact its extra time rule.
Business leaders argue that setting the wage requirement too excessive will exacerbate staffing challenges for small companies, and will power many firms to transform salaried employees to hourly ones to trace working time. Business who challenged the Obama-era rule had praised the Trump administration coverage as balanced, whereas progressive teams stated it left behind thousands and thousands of employees.
Under the brand new rule, some 300,000 extra manufacturing employees can be entitled to extra time pay, in keeping with the Labor Department. The same variety of retail employees can be eligible, together with 180,000 hospitality and leisure employees, and 600,000 within the well being care and social providers sector.
The National Retail Federation criticized the proposal and hinted at authorized challenges.
“While we are reviewing the impact of this proposal with our members, the proposed number is significantly higher than the rate of inflation,” NRF Senior Vice President of Government Relations David French French stated in a press release. “Further, the attempt to tie the hands of future administrations through automatic increases exceeds the Department’s authority.”
Last yr, the National Association of Manufacturers warned that it might problem any enlargement of extra time protection, saying such adjustments can be disruptive at time of lingering provide chain and labor provide difficulties.
Under the brand new rule, 27% of salaried employees can be entitled to extra time pay as a result of they make lower than the brink, in keeping with the Labor Department. A smaller quantity employees would additionally grow to be newly eligible due to a change to a rule that excludes very extremely paid salaried employees from extra time advantages even when they don’t carry out administrative, skilled or government duties. The Labor Department proposed elevating that wage threshold from $107,432 to $143,988.
The Labor Department stated the brand new threshold for duty-exempt workers brings it line with the thirty fifth percentile of earnings by full-time salaried employees in lowest-paid Census Region, the South. It’s much less beneficiant {that a} proposal from a bunch of Democratic lawmakers, who known as for a wage threshold of $82,732 by 2026, according to the fifty fifth percentile.
In its proposal, the Labor Department stated it tried to discover a stability that may handle one of many considerations raised in authorized challenges to the Obama-era coverage: That the brink was so excessive that it sidelined the so-called “duties” take a look at, which determines whether or not salaried employees are entitled to extra time pay primarily based on the work they carry out.
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