Overtime Pay Eligibility Is Widened in New Federal Rule

The Labor Department on Tuesday announced that it had finalized a rule expanding overtime pay eligibility to up to 1.3 million workers.

Under the new rule, most salaried workers who earn less than about $35,500 per year will be eligible for time-and-a-half overtime pay, up from the current threshold of about $23,700.

The rule is scheduled to take effect on Jan. 1.

The Obama administration had raised the threshold considerably higher in 2016 in an effort to cover millions more workers, but a federal judge first suspended and later invalidated the rule, which never took effect.

The current salary limit was set by the George W. Bush administration in 2004.

“This rule brings a common-sense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers,” said Patrick Pizzella, the acting labor secretary, in a statement.

Many employers and business groups had supported an increase in the limit but argued that the Obama threshold of about $47,500 was simply too high. They warned that it would require businesses to suddenly pay out hundreds of millions of dollars in overtime compensation or raises intended to move workers above the new threshold.

“Had the Obama administration adopted a number that had three in front of it, they would not have been sued,” said Tammy McCutchen, one of the authors of the Bush increase who is now a lawyer at the management-side firm Littler Mendelson.

The Obama administration had argued that its rule was in line with historical increases, and that it left fewer salaried workers eligible for overtime than had been eligible in 1975.

Salaried workers who make more than the legal threshold can also be eligible for overtime pay if they lack substantial decision-making authority. But the Obama administration argued that employers had either ignored this so-called duties test or circumvented it by giving low-level workers loftier titles, which made the salary threshold the de facto standard.

Mr. Trump’s first nominee for labor secretary, Andrew F. Puzder, strongly opposed a significant increase in overtime eligibility. But Alexander Acosta, who replaced Mr. Puzder after his nomination collapsed amid personal controversy, took a more conciliatory tack. Mr. Acosta endorsed a threshold in the low $30,000s during his 2017 confirmation hearings.

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