Overtime pay for a million more U.S. workers is now possible: "Employers want to get this right."

Overtime pay became available to more than a million workers on July 1.

The 1938 Fair Labor Standards Act set a 40-hour workweek for certain workers, who were eligible for overtime pay of 1.5 times their regular wage if they worked beyond the 40-hour mark. However, salaried employees who earned above a certain threshold and primarily performed executive, administrative, or professional duties were exempt from the overtime rule, as per the Department of Labor.

Since the 1970s, the salary threshold for overtime eligibility has been updated regularly, covering over 65% of the salaried workforce. However, the threshold has only been updated twice since 1975, in 2004 and 2019. Prior to the July 1 rule change, only around 15% of salaried workers were eligible for overtime pay.

"Many low-wage workers are still working more than 40 hours per week and making very little money, as seen in the health care, janitorial, fast food, food service, and hospitality industries," says Conti.

Here's how that changed this month.

'This is for people that don't have' bargaining power

Two groups of individuals have been impacted by the recent alteration. The first group comprises low-paid, salaried employees.

From July 1, salaried workers earning $844 per week or $43,888 per year or more are no longer exempt from receiving overtime pay. This change affects approximately one million workers, as per the DOL.

Highly compensated employees were also affected by the rule change, as the DOL calls them. Prior to the change, workers earning less than $107,432 per year could still receive overtime pay, but the qualifying criteria were slightly different from those provided to low-wage workers.

An employee who earns less than the new threshold, doesn't manage anyone else, and doesn't exercise independent judgment with respect to matters of significance, according to DOL, and whose job doesn't require advanced knowledge may be eligible for overtime pay. The Labor Department provides fact sheets and FAQs for those interested in learning more.

The threshold went up to $132,964 per year on July 1.

"According to Conti, the key is that when you earn a certain amount of money, you have the ability to negotiate with your employer about wages, hours, and duties. However, this change only applies to those who do not possess that kind of bargaining power."

According to Jessica Looman, administrator of the Wage and Hour Division at DOL, the issue is not solely about a person's income but rather whether they are protected by the Fair Labor Standards Act.

'Most employers absolutely do want to get this right'

The new rule is just the beginning of a series of changes to come.

The DOL has announced that on Jan. 1, 2025, the low-wage worker threshold will increase to $1,128 per week or $58,656 per year, which will cover approximately 3 million low-wage workers. Additionally, about 292,900 highly compensated workers will also be affected by the hikes in both July and January.

Every three years, starting from July 1, 2027, earnings thresholds will be updated.

Despite the challenge of the rule by businesses, Looman asserts that "most employers still want to adhere to it."

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