The Obama administration has unveiled new federal regulations that will double the salary threshold that qualifies for overtime pay, which could potentially increase the wages of 4.2 million U.S. workers. The new rule has received a mixed response from businesses.
Announced by the White House May 17, the new rules were finalized May 18 by the U.S. Department of Labor (DOL). The wage threshold for overtime pay will now be $47,476, which is double the previous threshold of $23,660.
The new regulations will go into effect Dec. 1 and are estimated to broaden the scope of full-time U.S. workers who qualify for overtime pay from 7 percent to 35 percent. In 1975, 62 percent of workers received overtime pay, according to USA Today.
Under the new rule, workers who make under $47,476 a year would now have to be paid time-and-a-half for every hour they work beyond 40 hours a week.
The new regulations will also require that the DOL raise the maximum pay every three years, which the Obama administration asserts will raise American wages by $1.2 billion annually, CNBC reports.
Labor Secretary Thomas Perez explained that a salary threshold was implemented originally to curb overtime pay of high-paid executives, but that over the years it had the unintended effect of cutting wages of middle-class workers who work long hours.
“Too few people are getting the overtime that [federal law] intended,” Perez said. “It’s simply not right.”
Vice President Joe Biden hailed the new regulations as “consequential… restoring and expanding access to the middle class. The middle class is getting clobbered.”
The vice president added, “The American people want to work. They want a fair shot. No handouts, no guarantees. Just a good job at a fair wage.”
Democratic state Rep. Mark Takano of California, who had influence in the regulation, praised the Obama administration’s new rule as a measure to curb income inequality, the Los Angeles Times reports.
“You see candidates capitalizing on anger in the electorate,” said Takano. “And what is that anger? It’s all about feeling that the economy is rigged, and that the government is complicit. The president has taken a serious step to un-rig that unfairness.”
Leaders in the business industry have had a mixed reaction to the new regulations, with the National Retail Federation (NRF) warning that the rule will compel retail employers to demote millions of employees to avoid overtime costs.
Several companies have threatened to turn their salaried employees into hourly workers, while others plan to simply raise wages over $47,476 to avoid overtime costs.
Labor Secretary Perez has countered that this will only result in companies raising wages and cutting down overtime, resulting in workers with more money and leisure time.