U.S. Extends Overtime Pay to 4.2 Million Salaried Workers

Image: A job seeker carries a worn briefcase
A job seeker carries a worn briefcase at a job fair in Berkeley, Calif. in February 2011.Justin Sullivan / Getty Images, file
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By Reuters

The Obama administration on Tuesday unveiled the final version of a long-awaited and controversial rule to extend overtime pay to 4.2 million U.S. workers, which marks one of the administration's most significant moves to address stagnant wages.

The rule, which has drawn intense criticism from business groups and Republicans, doubles the maximum annual income a salaried worker can earn and still be automatically eligible for overtime pay from $23,660 to $47,476 and requires that threshold to be updated every three years. It takes effect Dec. 1.

Read More: What Obama's New Overtime Rules Could Mean

Officials said many workers will earn more money, an estimated total of $12 billion over the next decade, while others will work fewer hours for the same pay.

"More than 4 million workers are either going to be paid more or get time back to raise their family, go to school ? or retrain to get a better job," Vice President Joe Biden said during a phone call with reporters on Tuesday.

The rule will likely touch nearly every sector of the U.S. economy but is expected to have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold.

Read More: Obama to Expand Overtime Pay to Nearly 5 Million Workers

Business groups, which lobbied heavily against the changes, say companies will be forced to cut wages and hours and may slow hiring.

The Obama administration and supporters of the new rule say the $23,660 threshold allowed companies to hold down labor costs by requiring workers with relatively low incomes to work well over 40 hours per week without additional pay.

The rule will likely face legal challenges, including claims that the U.S. Labor Department flouted legal requirements for creating new regulations. Republicans in Congress have said they will move to block the rule, but they would need to overcome a veto from President Barack Obama.