(Reuters) - The U.S. Department of Labor issued a long-awaited proposal on Thursday to extend mandatory overtime pay to a million more workers, far fewer than an Obama administration rule that was struck down by a federal judge.
Currently, salaried workers are automatically entitled to overtime pay only if they earn less than $23,660 a year, a figure set in 2004. The proposal released on Thursday would raise the threshold to $35,308.
The Labor Department in 2016 doubled the salary threshold to about $47,000, extending mandatory overtime pay to about 4 million U.S. workers.
But a federal judge in Texas ruled the following year that the ceiling was set so high that it could sweep in some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states had sued to challenge the 2016 rule.
Labor Secretary Alexander Acosta said in a statement that Thursday’s proposal would “bring common sense, consistency, and higher wages to working Americans.”
Business groups have closely tracked changes to overtime pay regulations and were critical of the Obama-era rule. Class-action lawsuits alleging unpaid overtime are common, and companies often pay millions of dollars to settle them.
A higher salary threshold could lead to more lawsuits, since many more workers would be covered by the federal law mandating overtime pay. Trade groups have also said a higher overtime threshold could push employers to cut some workers’ hours.
The Labor Department called on Thursday for public comment on its proposed overtime threshold, as well as whether it should be periodically increased to reflect inflation.
The Obama administration rule would have automatically raised the salary threshold every three years.
Reporting by Daniel Wiessner in Albany, New York; Editing by Peter Cooney