The Pay Floor With a Hole in It
In November 2024, a federal court in Texas struck down the Biden administration's rule that would have raised the salary threshold for overtime eligibility — the wage level below which workers are automatically entitled to time-and-a-half pay regardless of their job title — from approximately $35,568 per year to $58,656. The ruling effectively froze the threshold at its 2019 level and invalidated a second planned increase that would have pushed it even higher. The Trump administration, which had signaled opposition to the Biden-era expansion, declined to defend the rule vigorously in court and subsequently indicated it would pursue a substantially lower threshold of its own.
This is not a technical regulatory dispute. It is a question of who gets paid for the hours they work — and who doesn't.
Understanding the Threshold: What It Is and Why It Matters
The Fair Labor Standards Act of 1938 established the foundational principle that most American workers are entitled to overtime pay — one and a half times their regular rate — for any hours worked beyond forty in a week. But the law has always contained an exemption for workers classified as executive, administrative, or professional employees. The salary threshold exists precisely to prevent that exemption from swallowing the rule: it says that regardless of job title, any worker earning below a certain annual salary is automatically entitled to overtime protections.
When that threshold is low, the exemption expands. Employers can reclassify frontline workers — retail shift supervisors, assistant managers at fast food chains, low-level office administrators — as salaried "managers" earning just above the threshold, assign them unlimited hours, and pay them nothing extra for the overtime they work. This is not a fringe practice. It is a widespread, deliberate, and profitable business model.
At its 1975 peak, the overtime salary threshold covered approximately 62 percent of full-time salaried workers, according to the Economic Policy Institute. By 2016, before the Obama administration attempted a significant update, it covered fewer than 7 percent. The Biden rule, had it survived legal challenge, would have restored coverage to roughly 20 percent — still well below the historical norm, but a meaningful improvement. Its defeat leaves millions of workers exposed.
Photo: Economic Policy Institute, via in.nau.edu
The Industries Most Responsible
The misclassification problem is concentrated in predictable sectors: retail and food service, where the "assistant manager" title is handed out as a substitute for overtime pay; healthcare and social services, where direct care workers are frequently classified as supervisors of small teams to avoid overtime obligations; and the hospitality industry, where salaried workers routinely log fifty, sixty, or more hours per week without additional compensation.
The Economic Policy Institute has estimated that the failure to update the overtime threshold costs workers approximately $1.4 billion in wages annually — a conservative figure that does not fully account for the deterrent effect of a higher threshold on misclassification practices. Other analyses have put the aggregate wage theft figure substantially higher when accounting for the full population of workers who would have qualified under a restored historical standard.
The strongest counter-argument from the business community is that higher overtime thresholds impose compliance costs on small employers, potentially leading to reduced hours or hiring freezes rather than higher wages. This concern is not entirely without merit — labor economics is not simple, and mandate design matters. But the empirical evidence from states that have enacted their own higher overtime thresholds does not support the catastrophic projections of business lobby groups. California, for example, has maintained robust overtime protections well above the federal floor without the predicted collapse in employment.
The Human Arithmetic of Unpaid Time
Consider the arithmetic from the perspective of a single worker. A retail assistant manager earning $38,000 per year — just above the current federal threshold — who regularly works forty-eight hours per week is effectively donating eight hours of labor every week to their employer without compensation. At their implied hourly rate, that represents roughly $145 per week in unpaid wages, or more than $7,500 per year. Over a decade, that is $75,000 — enough for a down payment on a home, the elimination of student debt, or years of retirement savings — simply handed over because the law permits it.
Multiply that figure across millions of similarly situated workers, and the scale of the transfer becomes staggering. This is not wealth created by capital and filtered down through wages. It is wealth generated by labor and legally siphoned upward through a regulatory gap that the current administration has chosen, actively, to preserve.
The workers most affected are disproportionately women, who are overrepresented in the retail and service sector jobs where misclassification is most common, and disproportionately workers of color, who face additional barriers to negotiating compensation above the legal floor. The overtime threshold is, among other things, a racial and gender equity issue.
The Fix Is Simple — Which Is Why It Hasn't Happened
Restoring and indexing the overtime threshold to inflation is one of the most straightforward, highest-leverage economic policy interventions available to the federal government. It requires no new appropriations, no complex administrative infrastructure, and no dramatic restructuring of labor markets. It simply requires the political will to enforce a principle that Congress established nearly ninety years ago: that people who work should be paid for the hours they put in.
The Department of Labor has the authority to set the threshold through rulemaking. The current administration has chosen to set it low. That is a choice — not a technical necessity, not an economic inevitability, but a deliberate policy decision that favors employers over workers, capital over labor, and profit margins over people's time.
Photo: Department of Labor, via www.roofingcontractor.com
Progress in this direction will require either a change in federal administration, successful litigation by worker advocates, or state-level action — and all three fronts deserve the full attention of the labor movement and its allies. The overtime threshold is not a footnote in labor policy. It is a foundational measure of whether the law is on the side of working people or the businesses that employ them. Right now, the answer is clear — and it is unacceptable.
