Summary

Roughly 30,000 farmworkers in Colorado, including 4,400 migrant workers recruited by Colorado employers through the H-2A visa program, are treated unfairly under federal and state law. While Colorado took an important step when the state’s overtime law was reformed to make farmworkers eligible—acknowledging the racist policy enshrined in the federal Fair Labor Standards Act that excluded farmworkers from overtime pay—the law nevertheless continues to treat farmworkers unfairly with limited overtime protections compared to those provided to other workers in Colorado.

Farmworkers are some of the lowest-paid employees in the entire U.S. labor market and suffer from high rates of occupational injuries and death. As discussed in this commentary, growth in farmworkers’ very low wages has tracked very similarly to wage growth of other low-wage workers in recent decades. Yet farmworkers must work dramatically more hours than workers out side of agriculture before they can receive any premium for working long hours. There is no economic justification for this unequal treatment. Further evidence for this is the fact that according to the U.S. Department of Agriculture (USDA), labor costs as a share of farm income have not increased in two decades.1

This commentary explains and shows that:

• Overtime pay for farmworkers increases productivity and protects employees from being overworked.
• Farmworkers nationwide earned some of the lowest wage rates in the entire U.S. labor market and only three-fifths of what non-farm workers earn.
• Farmworkers in Colorado earn very low wages—half the average wage earned by all workers in Colorado.
• Wage growth over the past 20 years for farmworkers nationwide has been almost identical to wage growth for other low-wage workers outside of agriculture.
• Real wage growth for farmworkers in Colorado has averaged only 1.5% per year between 2010 and 2024.
• The number of Colorado farms has increased significantly over the past 15 years, suggesting a successful and growing industry in the state.
• California overtime pay standards cover more farmworkers than in Colorado, and outcomes there have shown that providing farmworkers with overtime pay protections on par with those applicable to workers outside of agriculture can be achieved without negatively impacting the farm industry.

If SB 26-121 becomes law, the resulting overtime threshold would further degrade standards for some of the lowest-paid and most vulnerable workers in the U.S. labor market, without improving productivity or benefitting the state’s economy. Farmworkers deserve better: they deserve equal rights and equal pay. While there is some cost to paying workers overtime, keeping the threshold where it is or taking it to 40 hours per week will be partially offset with productivity gains and will benefit farmworkers—most of whom are not employed year-round—by relieving some of the pressure they feel to work as many additional hours as possible, to the detriment of their health, safety, and family life—and possibly to the quality of the nation’s food supply.

Introduction

Farm labor is hard work that sometimes requires very long hours. When it does, workers deserve to be paid fairly for their time. The reason a 40-hour overtime threshold for farmworkers is not already the law should make us wince: When the federal law that governs overtime pay was written in the 1930s, it excluded two job categories that were overwhelmingly held by African Americans—farm laborers and domestic workers. States now have an opportunity to right this historic wrong and level the playing field for all workers

Overtime pay for farmworkers increases productivity and protects employees from being overworked

How do farm owners accommodate paying higher weekly wages when they ask their employees to work overtime? There is of course, some expense associated with overtime pay for farmworkers. But it’s not a dollar-for-dollar cost, so the impact is ultimately modest. The reason is increased productivity.

As we have seen in many other instances, when employers are required to pay higher wages, they make a bigger effort to increase the efficiency of the workplace. We’ve seen this when the minimum wage has been increased. We’ve seen it in unionized businesses. And we’ve seen it already on farms in states like New York and California, when farm owners were required to pay overtime.

What does an increase in productivity on farms look like?

Farm owners may invest in equipment that makes work easier and faster for workers. They may also find ways to organize work that is more effective. Paying overtime provides a real incentive for that. And, overtime pay will reduce the cost of recruitment and training, because it will reduce turnover. That’s something farm operators should value since most claim there are too few farmworkers available to fill open positions.

But importantly, it will also ensure that farmworkers do not work excessive hours just to make enough to survive. Farmworkers in Colorado earn wages that are not much above the state minimum wage, and because of the seasonality of farm work, most are not even able to earn those low wages year-round, reducing their earnings even further. Since farmworkers are not able to earn a living wage year-round, they will feel pressure to work additional hours, to the detriment of their health, safety, and family life—and possibly to the quality of the nation’s food supply.

Colorado’s current overtime threshold is also very different than the one in a state like California. In California, farmworkers earn time-and-a-half overtime after 8 hours in a day or 40 hours in a week.2 They also earn double their regular rate of pay after working 12 hours in a day. Colorado’s overtime threshold has no daily limit, only a weekly one. Even with the additional coverage of overtime for California farmworkers, the number of farm establishments has held steady in the state: going from 16,408 in 2015, the year before the California overtime law was passed, to 16,416 in 2024—suggesting that farms have not been negatively impacted and are still able to operate successfully in the nation’s largest agricultural state.3 

Farmworkers earned some of the lowest wage rates in the entire U.S. labor market in 2024 and only three-fifths of what non-farm workers earn

It is important to discuss and contextualize the wages of the 2.2 million farmworkers in the United States,4 roughly 350,000 of whom are crop farmworkers employed through the H-2A visa program.5 DOL’s National Agricultural Workers Survey (NAWS) shows that two-thirds of non-H-2A crop farmworkers are foreign-born, and that one-third are U.S.-born citizens.6

The agricultural industry has made numerous claims about skyrocketing and unsustainable wage growth for farmworkers, and the industry has lobbied at the state and federal level, pushing for federal actions by the executive branch and legislation to artificially restrain wage growth in the industry. As this letter discusses, many of the major claims made by the industry are not supported by the available evidence.

The most reliable data on farmworker earnings comes from the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service (NASS), which conducts the Farm Labor Survey (FLS), the results of which were, until recently, published twice a year in USDA’s Farm Labor report series, with data reported for reference weeks in January, April, July, and October.7 On August 28, 2025, USDA announced that it would discontinue its data collection program and reports, including the FLS,8 thus making 2024 the final full year for which FLS data are available. Before October 2025, FLS data was used by the U.S. Department of Labor (DOL) to set the Adverse Effect Wage Rate (AEWR) for most migrant farmworkers hired in the H-2A program. DOL based the AEWR on the average hourly earnings of nonsupervisory field and livestock workers, as reported by farm operators and by region in the FLS. DOL used the FLS data to set H-2A wages so they reflect current real-world trends in the farm labor market.

The FLS data up to 2024 data show that while there have been some documented real increases over the past three decades, they have not been unreasonably large increases, and they have occurred in a broader context where the wages of farmworkers are extremely low by any measure, even when compared with the hourly earnings of comparable non-farm workers, as well as when compared with average wages for all workers in the United States, and workers with the lowest levels of education (see Figure A).

Figure A

In 2024, the average earnings of all nonsupervisory farmworkers (i.e., combined field and livestock workers in the FLS) was $18.12 per hour. The average farmworker hourly wage in 2024 was just half (52%) of the average hourly wage for all workers in the United States in 2024, which was $34.27 per hour.9 The average farmworker hourly wage in Colorado was less than the national farmworker average, at just $17.84 per hour.

The average hourly wage for production and nonsupervisory non-farm workers—the most appropriate cohort of nonagricultural workers to compare with farmworkers—was $27.56, according to the Current Employment Statistics from the Bureau of Labor Statistics (BLS). In other words, farmworkers earning the national average earned just under 60% of what production and nonsupervisory workers outside of agriculture earned, or three-fifths. In 2024, the farmworker wage gap remained substantial and virtually unchanged from the previous three years. USDA’s ERS shows that between 1990 and 2023, the gap slowly narrowed from 50% to 60% and has described the wage gap between farmworker and nonfarm worker wages as “still substantial, but it is slowly shrinking.”10 

Farmworkers have very low levels of educational attainment and their wages are comparable to workers in other industries with similar educational attainment. According to the NAWS, 27% completed the 10th, 11th, or 12th grade, and only 16% completed some education beyond high school.11 Farmworkers earn the same or less than the two groups of non-farm workers with the lowest levels of education in the United States: Farmworkers earned 10 cents an hour more than the average wage earned by workers without a high school diploma ($18.02), but earned $5.61 less per hour than the average wage earned by workers with only a high school diploma ($23.73). Farmworkers in Colorado earned less than workers without a high school diploma ($17.84 vs $18.02).

Farmworkers in Colorado earn very low wages—half the average wage earned by all workers in Colorado

There are roughly 30,000 farmworkers in Colorado, including 4,400 migrant workers recruited by Colorado employers through the H-2A visa program. As noted above, in 2024, at the state level in Colorado, USDA’s FLS shows that the average hourly wage for farmworkers in Colorado (the combined average wage for field and livestock workers) was $17.84. Figure A also shows that the average wage for all workers in Colorado in 2024 was $33.63, according to the Occupational Employment and Wage Statistics (OEWS) of the Bureau of Labor Statistics.12 In other words, farmworkers just earned 53%, roughly half, of the average wage that all Colorado workers earned.13 And as noted above, most farmworkers are not employed year-round. Despite these extremely low wages, farmworkers in Colorado work in some of the most difficult and dangerous conditions while providing an essential function for the economy and state. Thus they deserve more protections under the overtime law, not fewer.

Industry claims about the increases in farmworker wages ignore the fact that wage growth over the past 20 years has been almost identical to wage growth for other low wage workers

The value and the rate of increase of the Adverse Effect Wage Rage (AEWR) for H-2A farmworkers has become a hot-button issue and many claims about its impact have been made over the years by representatives of industry. These are relevant to examine because the AEWR wages up until 2025 represented the wages that farm operators reported they were paying to their farmworkers in response to the USDA’s Farm Labor Survey. Thus, they represent the best data available on average farm wages at the national and regional level.

Many of the claims about wage growth for farmworkers made by industry advocates and even the U.S. Department of Labor (DOL) about year-to-year increases often do not adjust for inflation, which overstates the actual increase in terms of its dollar value. This is a basic mistake that misleads—and it misleads particularly during times of relatively rapid inflation, like the post-pandemic period. DOL echoes these misleading claims from industry advocates and makes their own false claim in the preamble to the October 2025 AEWR Interim Final Rule, making the year-over-year increases in farmworker wages seem greater than they truly are. DOL notes that the national average AEWR—i.e., the average combined field and livestock worker wage reported by farm operators nationwide—has more than doubled in nominal terms over 20 years from $8.56 in 2005 to $17.74 in 2025.14 But DOL’s own CPI Inflation Calculator adjusts the value of $8.56 in September 2005 to $13.99 in September 2025, resulting in a real increase of just over one-quarter over two decades, at 26.8%, which over that period averages out to just 1.2% per year.

If we examine the same period for other low-wage workers in nominal terms, we also see that wage growth for farmworkers as represented by the AEWR, is in line with—nearly identical to—nominal wage growth for other low wage workers in the United States. Figure B below shows annualized wage growth for workers paid at the 20^th percentile wage, as well as the median wage for workers with less than a high school education—both of which are good measures for typical low-wage workers. Both saw annual nominal wage growth that was at 3.5% between 2005-2025, the period that DOL identifies. Farmworkers earning the national average farmworker wage—over that same period saw annualized wage growth of 3.7%, nearly identical to other typical low-wage workers. Thus, DOL’s main example in its H-2A wage regulation of runaway wage growth for farmworkers does not hold water.

Figure B

Real wage growth for farmworkers in Colorado has averaged only 1.5% per year between 2010 and 2024

While Figure B looked at nominal wage growth over the past 20 years, EPI has previously calculated the total real wage growth for farmworkers (i.e., after adjusting for inflation) in every state between 2010 and 2024.15 We found that in Colorado, the average farmworker wage in 2010 was $14.51 (adjusted to 2024 dollars), growing to $17.84 fifteen years later in 2024. This amounts to a total increase of $3.33 over 15 years (in 2024 dollars), or 22.9%. Farmworkers in Colorado averaged a real wage increase of 1.5% per year over the 15-year period.

The number of Colorado farms has increased significantly over the past 15 years, suggesting a successful agricultural industry in the state

One common argument from farm operators is that if the wages of farmworkers are too high, those high wages will put them out of business. But according to the BLS’s Quarterly Census of Employment and Wages (QCEW), the number of agricultural establishments in Colorado has increased significantly over the past 15 years. QCEW data show that the number of agricultural establishments in Colorado averaged 1,412 between 2010 and 2012. By 2024, the number of agricultural establishments had increased to 1,812, an increase of 28.3%. The 2022-2024 average number of agricultural establishments was 1,856.16

Agribusiness representatives may claim that agricultural establishments in Colorado will be forced to close or will decide to move their operations to other U.S. states because of higher labor costs associated with farmworkers being entitled to overtime pay, but the reality is that the number of agricultural establishments has been increasing steadily, even as farmworker wages have risen modestly, suggesting that both farm owners and farmworkers can mutually benefit from a growing industry.

Conclusion: The Colorado legislature should not further degrade standards on farms by expanding the 56-hour overtime threshold—and should instead provide farmworkers with equal rights in the workplace by providing them overtime after 40 hours

The annual average real wage growth of 1.5% per year over 15 years represents moderate wage growth for farmworkers and suggests a relatively tight labor market for farmworkers. However, it represents little improvement in job quality for workers that have been exempted from key labor laws and wage and hour standards, who frequently toil for long hours in difficult conditions without any pay premium, and who consequently still earn only 50% to 60% of the wage earned by comparable nonsupervisory workers outside of agriculture (see Figure A and discussion above). It would take many more years of comparatively faster wage growth for farmworkers to begin to approach even three-fourths of what nonsupervisory workers earn outside of agriculture.

Further degrading standards for some of the lowest-paid and most vulnerable workers in the U.S. labor market will not improve productivity or benefit the state’s economy; it will do the opposite, taking money out the pockets of workers who live paycheck to paycheck and spend those earnings on necessary goods and services. All while making a minimal impact on the overall share of farm income that farm operators spend on workers’ wages.

Instead of passing SB 26-121, the state legislature should set a reasonable minimum standard for the wages paid to farmworkers, and that standard should be no different than the standard set for most other workers in Colorado, which is a 40-hour overtime threshold.

Endnotes 

1. Economic Research Service, “Labor Cost Share of Total Gross Revenues,” in “Farm Labor,” U.S. Department of Agriculture, Updated November 18, 2025.

2. See Department of Industrial Relations, “Overtime for Agricultural Workers,” State of California, last updated October 2023.

3. See Quarterly Census of Employment and Wages, Bureau of Labor Statistics, Series Id: ENU5100020511, Series Title: Number of Establishments in Private NAICS 11 Agriculture, forestry, fishing and hunting, for all establishment sizes in California – Statewide; Owner: Private, for 2010-24.

4. As counted by the latest Census of Agriculture from the U.S. Department of Agriculture, 2022.

5. See Daniel Costa and Ben Zipperer, “Trump’s new H-2A wage rule will radically cut the wages of all farmworkers: New estimates show farmworkers stand to lose $4.4 to $5.4 billion annually under DOL’s updated Adverse Effect Wage Rate,” Working Economics blog (Economic Policy Institute), November 26, 2025.

6. Wenson Fung, Kimberly Prado, Amanda Gold, Andrew Padovani, Daniel Carroll, and Emily Finchum-Mason, Findings from the National Agricultural Workers Survey (NAWS) 2021–2022: A Demographic and Employment Profile of United States Crop Workers, Research Report no. 17, JBS International for the Employment and Training Administration, U.S. Department of Labor. September 2023.

7. See National Agricultural Statistics Service, “Agricultural (Farm) Labor,” for more background and to access Farm Labor Reports, U.S. Department of Agriculture.

8. Federal Policy Watch, “USDA ends the Agricultural (Farm) Labor Survey, the U.S.’s only survey of agricultural employers,” Economic Policy Institute, September 3, 2025.

9. Economic Policy Institute, State of Working America Data Library, “Hourly wage, average – Average real hourly wage (2024$),” 2025.

10. Economic Research Service, “Wages of Hired Farmworkers” in “Farm Labor,” U.S. Department of Agriculture, Updated November 18, 2025.

11. Wenson Fung, Kimberly Prado, Amanda Gold, Andrew Padovani, Daniel Carroll, and Emily Finchum-Mason, Findings from the National Agricultural Workers Survey (NAWS) 2021–2022: A Demographic and Employment Profile of United States Crop Workers, Research Report no. 17, JBS International for the Employment and Training Administration, U.S. Department of Labor. September 2023.

12. https://data.bls.gov/oes/#/area/0800000

13. A note about the data: The wage cited is for Colorado farmworkers in USDA’s FLS represents the wage reported for the Mountain II region, which surveys farm operators in Colorado, Nevada, Utah. USDA’s FLS conducts wage surveys by multistate region, except for California which USDA surveys as its own individual region.

14. Employment and Training Administration, Adverse Effect Wage Rate Methodology for the Temporary Employment of H-2A Nonimmigrants in Non-Range Occupations in the United States, U.S. Department of Labor, Interim Final Rule, 90 Fed. Reg. 47914, at 47923 (October 2, 2025).

15. See Table 1 in Daniel Costa, EPI comment on DOL’s 2025 Interim Final Rule modifying the AEWR methodology for H-2A farmworkers, Economic Policy Institute, December 1, 2025.

16. See Quarterly Census of Employment and Wages, Bureau of Labor Statistics, Series Id: ENU5100020511, Series Title: Number of Establishments in Private NAICS 11 Agriculture, forestry, fishing and hunting, for all establishment sizes in Colorado – Statewide; Owner: Private, for 2010-24.

This FAQ answers key questions about the “no tax on overtime” policy and what it means for working people.

Daniel Navarrete
Division of Regulations, Legislation, and Wage and Hour Division,
U.S. Department of Labor
Room S-3502
200 Constitution Avenue NW
Washington, D.C. 20210

Comments on RIN 1235-AA51: Application of the Fair Labor Standards Act to Domestic Service.

Dear Mr. Navarrete:

The Economic Policy Institute (EPI) submits this comment to strongly oppose the Department of Labor’s Notice of Proposed Rulemaking Application of the Fair Labor Standards Act to Domestic Service. We strongly oppose stripping basic wage and hour protections, which should be the fundamental right of every worker, away from one of the most critical sectors of the U.S. workforce. We urge the Department of Labor (DOL) to instead support the agency’s proposed alternative that would preserve the existing regulations that provide for a minimum hourly wage (currently $7.25 at the federal level) and overtime protections for the millions of workers that provide care and services in the home.

The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI conducts research and analysis on the economic status of working America, proposes public policies that protect and improve the economic conditions of low- and middle-income workers, and assesses policies with respect to how well they further those goals.

For years, EPI has conducted research on the low-wage workforce, including on domestic workers and the home care workforce specifically. EPI research and those from other trusted sources have repeatedly found that, despite the invaluable nature of their work, most home care workers face low pay, rarely receive benefits, and have less access to full-time work than other workers. Because they work in private homes, they are outside of public view and isolated from other workers, leaving them particularly vulnerable to exploitation.1

Overturning Fair Labor Standards Act (FLSA) protections for these workers would represent a massive blow to low-wage workers, and to women and people of color in particular, who are heavily overrepresented in this industry, as we discuss further below. Caregiving work can be meaningful and rewarding, but it is also often physically, mentally, and emotionally demanding work. Home care workers work with elders, people with disabilities, people recovering from illness or medical procedures, and assist with intimate day-to-day including administering medication, monitoring health vitals, bathing, preparing meals, providing transportation, and engaging in activities. This provides essential caregiving support to both clients and their families. As the U.S. population ages, and more and more people, both seniors and people with disabilities, prefer to receive care in their homes and integrated community settings rather than in institutional settings such as nursing homes or group homes, we should support, not undermine, the home care workforce as they help to meet these needs.

Many groups of domestic workers were originally excluded from the FLSA. This policy decision explicitly left domestic and agricultural workforces–which, at the time of enactment in the New-Deal era, were majority-Black–without the basic minimum wage and protections being extended to other workers. As the NPRM notes, Congress extended FLSA protections to some groups of domestic workers in 1974, including those who were employed directly by a member of a household to perform tasks. But the 1974 changes to the bill also established the vague and overused “companionship exemption.” Over time, employers have applied the companionship exemption far wider than its original intent. We argue that the companionship exemption was never meant to say that workers providing caregiving services for pay through third-party employers, such as through home health care staffing agencies, should not receive at least the minimum wage. The current NPRM seeks to rescind the Department’s 2013 home care regulation (2013 final rule) that narrowed this exemption. In these comments, we discuss how the Department’s economic impact analysis for this NPRM is incomplete, methodologically flawed, and internally inconsistent.

The Department’s NPRM contains inadequate economic analysis and understates the economic costs of this regulation that would be borne by home care workers.

The regulatory impact analysis (RIA) in the NPRM is fundamentally incomplete. It significantly understates the complexity and scope of impacts arising from this proposed rule. It (1) fails to quantify key transfers, (2) overlooks distributional harms, and (3) makes unsupported claims of benefits and downplays costs and transfers. This RIA cannot support informed decision-making or a rational comparison of regulatory alternatives.

Failure to quantify key impacts

The RIA is less than 5 pages long and provides no dollar impacts—no estimated regulatory familiarization costs; no estimated changes in hiring costs; no estimated transfers from workers to employers as a result of loss of minimum wage protections, overtime protections, or compensation for travel time; no estimated impacts of changes in the rate of turnover; no estimates of employment impacts; nothing. The analysis is entirely speculative. By contrast, the RIA in the 2013 final rule2—which this proposal would rescind—included all of these estimates and more. Omitting them here is a flagrant violation of the Administrative Procedures Act requirement to assess reasonably quantifiable impacts.

Overlooks distributional harms

The Department acknowledges that rescinding the 2013 rule will transfer income from workers to employers and consumers, yet it fails to provide even a range of those transfers, or to acknowledge the distributional harms that will result. These harms are not abstract: home care workers are among the lowest-paid workers in the U.S. economy, and shifting income away from them will directly harm them and increase inequality.

In 2022, EPI produced a chartbook with detailed information about the demographics, wages, benefits, and poverty rates of several domestic worker occupations, including home care workers.3 The chartbook uses the same definition of home care workers used in the Government Accountability Office (GAO) study cited by the Department in the NPRM.4 As detailed below, the demographic profile of home care workers is different from that of workers as a whole, with home care workers disproportionately likely to come from demographic groups—like women and people of color—that have lower average earnings due to the impact of broad structural biases on labor market outcomes. But the EPI chartbook shows that even after controlling for gender, nativity, race/ethnicity, educational attainment, age, marital status, and geography, agency-based home care workers have an hourly wage that is 25.6% less than other similar workers, and non-agency-based home care workers have an hourly wage that is 31.3% less than other similar workers. Annual earnings gaps are even larger—42.8% and 58.3%, respectively.

Home care workers are also much less likely to have workplace benefits than other similar workers: after applying the same set of controls listed above, agency-based home care workers are 17.1 percentage points less likely to have employer-provided health insurance and 14.1 percentage points less likely to have an employer-provided retirement plan than other similar workers. Similarly, non-agency-based home care workers are 24.9 percentage points less likely to have employer-provided health insurance and 20.6 percentage points less likely to have an employer-provided retirement plan.

Finally, home care workers are much more likely than similar workers to live below the poverty line or below twice the poverty line—the latter being what researchers often use as a measure of what it takes to make ends meet. Again after applying the same set of controls, agency-based home care workers are 7.0 percentage points more likely to live in poverty than other similar workers, and 19.9 percentage points more likely to live below twice the poverty line. Non-agency-based home care workers are 7.1 percentage points more likely to live in poverty than other similar workers, and 13.6 percentage points more likely to live below twice the poverty line.

Using the same definition of home care workers, we have done related calculations using updated data (pooled 2022-2024 data).5 We found that 85.0% of home care workers are women, 63.3% are people of color, 32.6% are immigrants, 85.7% do not have a college degree, 28.4% are custodial parents of at least one child under 18, and only 8.6% are represented by a union. The median home care worker earns $16.57 per hour, which is less than $35,000 per year for a full-time, full-year worker and on par with the 20^th percentile of the overall wage distribution.6 Taking away minimum wage and overtime protections from such a vulnerable group virtually guarantees a regressive transfer of income.

Unsupported claims of benefits and downplaying costs and transfers

The main benefit the Department cites for the recission of the 2013 rule is that, by lowering labor costs, it will expand access to health care services by encouraging more providers to enter or grow in the home care market. This claim is absurd, as it ignores the fact that there is a severe shortage of home care workers. This fact is very explicitly detailed elsewhere in the NPRM, which notes, for example, that “the supply of home care workers is failing to keep pace with the growing demand for home care services” and cites a 2023 industry report that “the workforce shortage in home-based care has reached crisis proportions,” with “home health care providers [reporting that they turn] away over 25% of referred patients due to staff shortages.”7

With providers already forced to reject patients because of too few workers, there is no meaningful room for expansion given the current supply of workers. Lowering wages will not expand labor supply. Virtually the only way to draw more workers into the profession is to improve these jobs. Stripping away protections that boost pay will make recruitment harder, not easier, and will worsen the problem of insufficient access to home care services. Interestingly, the NPRM does acknowledge that the rule could “lead to increased employee turnover and difficulty attracting skilled workers to the industry.”8 This admission directly contradicts the Department’s central claim that rescission will expand access to home care services, underscoring the internal inconsistency of the analysis.

It is worth noting that a worsening home care worker shortage does not mean, as the NPRM suggests, that the 2013 final rule failed to attract workers to the industry. The NPRM states:

And although the Department predicted in 2013 that ‘‘guarantee[ing] minimum wage and overtime compensation for home care jobs . . . will attract more workers to the home care industry,’’ growth in the home care workforce ‘‘slowed’’ in the years following the 2013 rule, with ‘‘the number of home care workers per100 [individuals receiving home and community-based services] declin[ing] by 11.6 percent between 2013 and 2019.

First, the number of home care workers per 100 individuals receiving home care is a deeply flawed measure to use as evidence that the 2013 rule didn’t attract workers. That ratio depends not only on workforce growth, but also on growth in the number of people needing care—a factor driven by external forces like demographic shifts, not by labor supply. In fact, the number of individuals receiving care grew by more than 25% between 2013 and 2019, according to the study the department cited.9 If instead that population had grown at roughly the same pace as the overall nonfarm payroll workforce—1.7% annually on average—the ratio would have meaningfully increased.

However, the report the Department cited in that passage does indeed show that the home care workforce grew more slowly from 2013–2019 than from 2008–2013.10 But it is crucial to recognize the vastly different macroeconomic conditions in those two periods. The first period, 2008–2013, consisted of the Great Recession and a very weak recovery—the unemployment rate reached 10% in 2009 and was still 7.4% on average in 2013. In that environment, workers often had little choice but to take whatever jobs they could get, including the low-paying home health care jobs that were available because demand for home health services was growing.

By contrast, the 2013–2019 period was marked by a steadily strengthening labor market, with the unemployment rate getting below 5% by 2016 and as low as 3.5% in 2019. In this context, workers were far less compelled to take whatever jobs they could find, no matter how low the pay—and, as described above, home health care jobs are among the lowest paid in the economy, even after the 2013 rule. It is therefore unsurprising that growth in home care employment would slow between these two periods. The fact that the Department took the slowdown in growth between two periods—periods that were very different on measures that had nothing to do with the rule—as evidence that the rule didn’t draw people into the profession is an egregious error in economic reasoning.

The Department further claims that “workers who are employed by multiple home care agencies…may be able to consolidate their employment with one agency, thus yielding a convenience-related benefit.” This would apply to at most a very small fraction of home care workers: we find that just 7.4% of home care workers have more than one job. It is also worth noting that the GAO report cited by the Department in the NPRM finds no evidence that the share of home care workers with multiple jobs increased following the rule.11

It is also important to note that the fact that the federal minimum wage is currently set at a historically low level does not imply that rescinding minimum wage protections for home care workers would have little practical effect, as the NPRM suggests. First, workers who become exempt from FLSA coverage as a result of this rescission may be at risk of losing coverage under higher state and local minimum wage laws in any states/localities that don’t have their own home care worker coverage. But perhaps more importantly, although the federal minimum wage has been allowed to erode in real terms, it should not be assumed that this will persist indefinitely. Over time, it is reasonable to expect that the federal minimum wage will be increased, in which case exempting home care workers would prevent them from sharing in those future improvements.

Evidence confirms that, unsurprisingly, minimum wage increases do indeed raise the wages of home care workers. For example, a 2022 study published in the journal Home Health Care Management & Practice found that home health aides’ hourly wages were $1.00 higher in states that increased their minimum wages from below $8 to above $10.12

The Department also discusses that the benefits of the rule will include decreased regulatory compliance burden on home care providers. However, the Department does not provide any meaningful evidence for this assertion. And as the National Domestic Workers’ Alliance has noted, the record-keeping requirements of the FLSA–which include basic timesheets and information on hours worked that are already widely used by all covered employers in the U.S.–are not any more burdensome than compliance with other regulations, such as tax law. Recordkeeping for both employers and for state agencies are critical in public transparency–particularly since so many agencies receive public funds through Medicaid in order to operate.

Finally, the Department’s assumptions that the recission will have limited negative effects relies heavily on the 2020 GAO study mentioned above which concluded that the 2013 final rule was not associated with higher hourly or weekly pay for home care workers relative to other occupations with similar entry requirements. However, the Department ignores more recent research by an Associate Professor at Rutgers University that uses narrower comparison groups that are more similar to the home care workers impacted by the rule and finds that the 2013 rule was indeed associated with higher hourly pay and higher weekly earnings among agency-based home care workers.13

In sum, the Department’s economic impact analysis is incomplete, methodologically flawed, and internally inconsistent. It omits quantifiable impacts that were standard in the 2013 rulemaking, disregards the regressive distributional consequences for a disproportionately vulnerable workforce, and relies on selective evidence. By overstating potential benefits and minimizing costs and transfers, the NPRM fails to provide a sound analytical basis for rescission.

DOL should withdraw this rule and instead focus on strengthening protections and enforcing existing labor rights for home care workers.

Home care occupations are projected to grow at a much faster pace than the rest of the workforce. Home care workers are critical to supporting families and households across the country. To draw workers into this vital industry, it is crucial home care jobs become good jobs that pay family-sustaining wages and that provide dignified protections and working conditions to workers.

For far too long before DOL’s final rule went into effect in 2015, the home care industry was reliant on an exploitative labor model dependent on paying low wages. Taking away basic protections for these workers is a loss for the workers themselves, who will find their pay and benefits slashed even further, and will harm patients and clients who need caregiving services and struggle navigating an industry that has long faced challenges with worker turnover and retention. The home care industry has already adjusted to providing these basic protections, as the rule has been in full effect for a decade. Revoking these protections is legally unwarranted, economically damaging, and unjust. We urge the agency to withdraw the rule as proposed.

Sincerely,

Heidi Shierholz, Ph.D.
Executive Director
Economic Policy Institute

Samantha Sanders
Director of Government Affairs & Advocacy
Economic Policy Institute

1. Laura Dresser, Valuing Care by Valuing Care Workers: The Big Cost of a Worthy Standard and Some Steps Toward It, Roosevelt Institute, October 2015.

2. 78 Fed. Reg. 60497.

3. Asha Banerjee, Katherine deCourcy, Kyle K. Moore, and Julia Wolfe, Domestic Workers Chartbook 2022, Economic Policy Institute, November 2022.

4. Government Accountability Office (GAO), Fair Labor Standards Act: Observations on the Effects of the Home Care Rule, October 2020.

5. Economic Policy Institute, Current Population Survey Extracts, Version 2025.8.8, https://microdata.epi.org. (Pooled 2022-2024 data).

6. The average of the overall 20^th percentile wage from 2022-2024 is $16.37. Economic Policy Institute, “Hourly wage percentiles – Real hourly wage (2024$),” State of Working America Data Library, 2025.

7. 90 Fed. Reg 28981.

8. 90 Fed. Reg 28982.

9. Amanda R. Kreider and Rachel M. Werner, “The Home Care Workforce Has Not Kept Pace with Growth in Home and Community-Based Services”, Health Affairs no.5, April 2023. https://doi.org/10.1377/hlthaff.2022.01351.

10. Amanda R. Kreider and Rachel M. Werner, “The Home Care Workforce Has Not Kept Pace with Growth in Home and Community-Based Services”, Health Affairs no.5, April 2023. https://doi.org/10.1377/hlthaff.2022.01351.

11. Government Accountability Office (GAO), Fair Labor Standards Act: Observations on the Effects of the Home Care Rule, October 2020.

12. Di Yan, Helena Temkin-Greener, Ronni Pavan, Hao Yu, and Shubing Cai, “Did Minimum Wage Policy Changes Impact Home Health Workforce?”, Home Health Care Management and Practice no.25, pp. 206-212, December 2022. https://doi.org/10.1177/10848223221140502.

13. Joy Jeounghee Kim, “Extending the FLSA Protection to Home Care Workers: Effects on Workers’ Labor Market Outcomes,” Rutgers University, 2021. https://doi.org/10.7282/00000139. 

The overtime provisions of the Fair Labor Standards Act (FLSA) provide protections to most hourly workers and many low-salaried workers, guaranteeing time-and-a-half pay for hours worked in excess of 40 a week. FLSA overtime rules apply to all private businesses with annual revenue of at least $500,000, as well as hospitals, care centers, schools, and public agencies. Because federal law otherwise sets no limits on the hours employers can require people to work (and no requirements for rest breaks or days off), overtime pay is an especially important policy to disincentivize overwork and encourage employers to share work across more employees, bolstering hiring.

What are the threats to federal overtime protections?

Current threats to overtime pay include:

• Excluding workers from overtime by lowering the salary threshold for automatic eligibility: The first Trump administration took action to lower the salary threshold at which workers become automatically eligible for overtime pay when they work more than 40 hours in a week, denying eligibility to millions of low-salaried workers. It is widely anticipated that the second Trump administration will likewise block a new proposed rule to raise the salary threshold, again denying coverage to millions of workers who earn between $35,568 and $58,656 (likely by refusing to defend the rule against ongoing court challenges from business groups).
• Stripping overtime coverage from direct care workers: The Trump administration has proposed rule changes that would reverse a 2013 regulation expanding overtime coverage to include “direct care” workers, such as home health aides and certified nursing assistants, employed by agencies.
• Allowing employers to deny overtime pay: Proposals laid out in Project 2025 recommend altering the FLSA to allow employers broad new discretion to deny workers overtime pay by altering calculations of what counts as a workweek, substituting time off in place of overtime pay, and/or deeming remote employees ineligible for overtime pay.
• Increasing likelihood of underpayment or nonpayment of overtime: Failure to pay overtime is one of the most common forms of wage theft, and diminished U.S. Department of Labor (DOL) capacity to enforce wage and hour laws will exacerbate this problem.

How can states maintain and strengthen overtime protections?

States have legal authority to establish their own overtime standards so long as they are at least as protective as those in the FLSA; federal overtime laws set a floor above which states can adopt and enforce their own stronger standards. Given the very real risk that aspects of FLSA overtime protections could be eliminated (or will go unenforced), it is important for states to at least lock in existing FLSA overtime protections. Additionally, states should seek to go beyond the current floor, as some FLSA provisions—such as those exempting certain categories of workers from overtime—are long overdue for an update.

Step I: Update state statutes to lock in current federal protections

Because for decades most states have deferred to the FLSA’s overtime standard and relied at least in part on federal enforcement of overtime laws, existing overtime language in state statutes is often outdated, incomplete, or inadequate. For example:

• Minnesota state law only requires overtime after 48 hours of work in a week; in Kansas it is 46. These laws are of no practical import right now, because the FLSA overrules them, but in the absence of FLSA protections, workers in these states would have to work more hours to qualify for overtime.
• In several states—including Iowa, Oklahoma, Tennessee, and others—there is no state statutory right to overtime. At present, workers with unpaid overtime claims in these states can only go to the federal government for redress, meaning that if DOL lacks adequate enforcement capacity, workers’ recourse may become limited. Moreover, while the FLSA currently covers workers in all states, if FLSA overtime protections disappear, workers would have no right to overtime pay at all in these and other states with no overtime language in state code.
• Some states, like Hawaii and Michigan, do require overtime pay after 40 hours in a workweek but currently exclude employment that is subject to the FLSA from state coverage. States with such exclusions should remove them to ensure consistent state coverage and enforcement jurisdiction, rather than expecting some workers to rely solely on tenuous federal overtime standards and enforcement.

Many states, such as New Jersey, New Mexico, and Pennsylvania, already mirror the basic overtime provisions of the FLSA, guaranteeing overtime pay after 40 hours in a workweek. Lawmakers in other states should act quickly to ensure their state codes at a minimum follow suit. There is no harm in codifying overtime protections in state law even if federal standards don’t change, whereas delaying updates to state law puts workers at risk of real harm if federal protections are diminished or left unenforced.

One legislative model for states to consider is the 2025 “trigger law” enacted in Illinois that directs state agencies to ensure all state wage and hour standards remain at least as protective as existing federal wage and hour standards in the event that federal standards are weakened or eliminated. 

State overtime rules, if they exist, are typically part of state labor and employment or wage and hour statutes. Policymakers and advocates should review their state’s laws to assess whether overtime language codifies at least the same level of protection currently provided under the FLSA and to ensure that the state has the power to enforce its own overtime laws without relying on the federal government.

Step II: Close critical gaps in overtime coverage

While the FLSA sets an important floor for overtime pay, it is an 80-year-old statute with notable gaps in coverage that state policymakers should try to close. Priority steps states can take to update overtime coverage include:

1. Eliminate occupational exemptions: Agricultural workers are not covered by the FLSA, a racist holdover from when the act was initially passed in 1938. And while some domestic service workers such as nannies and house cleaners were covered in 1974, certain home care workers providing care for seniors and persons with disabilities remain excluded. A 2013 Obama-era rule that extended coverage to many home care workers is at risk of being rolled back by the Trump DOL. Other exceptions apply to smaller categories of workers. States have it in their power to eliminate these exemptions. For example, several states—including California, Washington, and Colorado—already cover agricultural workers under state minimum wage and overtime laws. And some states like California have already taken action in 2025 to ensure that state law will guarantee home care workers overtime pay in response to proposals to remove existing federal protections. 
2. Raise and automatically update the salary threshold for exemption of workers in executive, administrative, and professional (EAP) jobs: Currently, workers in EAP roles are exempt from FLSA overtime requirements if they earn more than $684 per week. The Biden administration issued a rule to update that threshold to $844 per week in 2024, $1,128 per week in 2025, and to automatically adjust for inflation thereafter. This rule was blocked by the courts and there is every expectation that the Trump administration will not defend the new rule. States can move to lock in the new threshold and assure regular future updates. Six states—Alaska, California, Colorado, Maine, New York, and Washington—already have an EAP salary threshold above the federal level. For example, Washington will by 2028 remove the exemption for any employee making the equivalent of 2.5 times the state minimum wage or less. Because the state minimum wage is indexed to inflation, the state’s salary threshold will continue to rise with the state minimum wage.

Step III: Modernize overtime policies to fit today’s economy, improve safety and productivity, and promote work-life balance

In addition to codifying FLSA overtime rules and closing coverage gaps, there are many steps states can take to serve priority policy goals like preventing overwork, stabilizing work schedules, and increasing work-life balance. Indeed, overtime pay was incorporated into the 1938 FLSA as a compromise, following decades of international worker struggles for the eight-hour day and during a period of intense debate over whether public policy should place some limits on the often near-absolute control many employers exerted over workers’ time. These are questions worth revisiting in the context of state policymaking today, when overtime pay alone has failed to curb excessive use of forced overtime or scheduling practices that in some industries include dangerously long shifts or months of consecutive shifts with no days off, both of which are closely correlated with declining productivity and adverse health and safety impacts.

1. Add overtime pay to discourage excessively long shifts, encourage periodic days off, and promote fair scheduling. Many state laws include useful examples of overtime policies targeted at discouraging excessive consecutive hours of work or days of work without time off:
   • California mandates that workers receive double time (not just time-and-a-half) after 12 hours of work in a day.
   • In Alaska, overtime pay applies to all eligible employees working more than eight hours in a day. Other states have more limited expansions; for example, Oregon requires manufacturing employers to begin paying overtime after 10 straight hours.
   • A number of states, including Alaska, Florida, Nevada, and Oregon, make some employees eligible for overtime pay after a certain shift length, regardless of the number of hours worked in the week.
   • Kentucky requires overtime pay for all work done on a seventh straight day of work. California requires overtime pay for all work done beyond eight hours on a seventh straight day of work.
   • Fair scheduling laws, which Oregon and a number of cities have adopted, similarly require employers to provide advance notice of schedules and extra pay for schedule changes. Some laws also crack down on “clopenings”—the practice of requiring an employee to work late in the evening and start again early the next morning—by requiring extra pay for shifts within 12 hours of each other.
2. Guarantee rights to refuse excessive forced overtime: States could also ensure that hourly workers have the right to decline excessive overtime hours without fear of retaliation. For example, Maine proposed legislation to protect overworked paper industry workers—who were sometimes forced to work 24-hour shifts—guaranteeing a right to refuse more than two hours of overtime in a day, and requiring seven days advance notice of schedules.
3. Expand overtime laws to incentivize transitions to shorter work weeks: Well before passage of the FLSA and up to the present day, workers and advocates have proposed that productivity gains should result in shorter work hours (with no loss of pay). Numerous versions of proposals to move to a four-day or 32-hour standard work week have been introduced in several states, including pilot and study bills. State expansions of overtime pay to hours worked beyond 32 in a week (or other numbers less than 40) could help incentivize shifts toward shorter work weeks.
4. Look to tested overtime language in collective bargaining agreements for policy models: Collective bargaining agreements negotiated between unions and employers often contain more expansive overtime and scheduling provisions that can serve as models for more ambitious policy ideas. For example, language in such agreements may list additional circumstances when overtime or other forms of premium pay are required for work on weekends, holidays, on-call hours, or following scheduling changes. These agreements may also set out processes for workers to accept or decline additional work hours or new shift assignments, timelines for employers to provide notice of work schedules, fair procedures for assigning overtime, and more.

Additional recommended resources 

• State minimum wage [and overtime] laws (U.S. Department of Labor) 

• Overtime laws by state (Bloomberg Law) 

• Explaining the Department of Labor’s new overtime rule that will benefit 4.3 million workers (Economic Policy Institute) 
• Home care worker rights in the states after the federal companionship rules change-2013 (National Employment Law Project; note that this resource is an excellent tool for identifying relevant state code sections, but may not reflect more recent changes to state laws) 

Editor’s note: This piece was revised on October 24, 2025, to add an “Additional recommended resources” section and include updates on federal and state policy developments that took place after initial publication. 

Long-standing U.S. worker rights and protections are under acute threat. These include attempts to roll back standards that set a national floor for minimum wages, health and safety, nondiscrimination, unemployment insurance, and other rights and protections long taken for granted in most U.S. workplaces.

Jump to the state solutions

Under the second Trump administration, intense attacks have proliferated by the day and taken many forms. Cuts to federal agency funding and mass firings of federal civil servants—targeting agencies like the Equal Employment Opportunity Commission, the CDC’s National Institute of Occupational Safety and Health, the National Labor Relations Board, and U.S. Department of Labor units like the Occupational Safety and Health Administration and the Wage and Hour Division—have quickly imperiled the federal government’s capacity to ensure U.S. workers get paid what they’re owed, stay safe at work, have the freedom to form a union, and work in environments free from discrimination. Simultaneously, executive actions have directly targeted rights of workers for elimination. Examples include decisions to lower wages of federal contractors; strip union rights of federal employees; revoke work authorization for hundreds of thousands of migrant workers; and block the implementation of new standards to safeguard workers’ overtime wages, freedom to change jobs, and right to organize. Most recently, the administration has  taken initial steps to roll back scores of wage and hour and health and safety standards via proposed regulatory changes.

At the same time, Trump’s escalating and often lawless attacks on migrant workers are fostering a climate of fear that will worsen workplace conditions across the country and make it harder for workers to report labor abuses. The administration has also cancelled programs that protected workers from immigration-related retaliation when speaking up about labor violations or that helped prevent exploitative, illegal forms of child labor by allowing migrant youth fleeing neglect or abuse to petition for legal work authorization and a pathway to citizenship.

Trump’s attacks on workers run parallel to industry-backed attempts to ratchet down state labor standards while building pressure to erode federal standards for the whole country. For example, lawmakers in Ohio have repeatedly paired legislation to extend hours children can be scheduled to work on school nights (contradicting current federal guidelines) with concurrent resolutions calling on Congress to “change [the] Fair Labor Standards Act” to bring federal standards in line with weaker state rules. Project 2025, the policy roadmap closely followed so far by the second Trump administration, proposes allowing states to “opt out” of federal minimum wage, overtime, and child labor standards. If pursued, this drastic step would put workers at risk of extreme forms of exploitation.

The crisis calls for urgent action. At a minimum, states must be equipped to maintain and enforce basic protections should at-risk federal standards disappear. The crisis also presents opportunities for states to do much more to:

• remedy longstanding gaps and exclusions in weak or outdated labor and employment laws;
• advance new policies that address the pressing challenges of eroding worker power, growing income inequality, persistent racial and gender wage gaps, and declining job quality; and
• position states over the long term to assume more expansive, effective roles in enacting and enforcing key protections that form the bedrock of an economy that works for all.

Like the misguided “no tax on tips” bills that have also been moving in some states, these “no tax on overtime” measures are a gimmick. Though pitched as support for regular working people, the primary beneficiaries of these proposals would be employers and high earners who game the system. Exempting overtime from taxation would do more harm than good, and there are far better ways to support workers putting in long hours.

In summary, exempting overtime from taxation would:

1. Encourage excessive hours of work while exacerbating inequities between workers able to work long hours and those who cannot.
2. Put downward pressure on base wages.
3. Open up a tax loophole easily gamed by high earners that would drain public budgets while further complicating the tax system.

Map

No tax on overtime encourages excessive working hours and disregards widespread support for reducing work hours

Overtime exists to disincentivize employers from overworking their employees. If a boss asks workers to put in more than 40 hours in a week, they must pay a premium—usually 1.5 times their regular rate of pay—for those excess hours. (In some states, employers must pay overtime in other circumstances, such as when workers work more than eight hours in a day or work on a Sunday.) This policy decision to require extra pay for excess hours—established in the Fair Labor Standards Act (FLSA) of 1938—created the 40-hour work week. It was a policy choice made only after fierce struggle, organizing, and advocacy by workers who labored 60–80 hours a week in difficult and dangerous jobs.

The 40-hour work week has been the standard for most workers for nearly a century, but fundamentally, it is an arbitrary choice. In recent years, especially in the wake of the COVID-19 pandemic, public sentiment has shifted toward working less than 40 hours per week. According to a recent survey, 81% of full-time workers in the U.S. support a four-day work week.

Exempting overtime from taxes would encourage employees to work longer hours. For those workers wanting to work more than 40 hours a week, this tax benefit seems positive. But given that the vast majority of the public supports a shorter work week, it seems likely that workers desiring overtime do so because they like the extra money, not because they want to be working nights and weekends. Many would likely rather get a raise and not have to work extra hours, especially considering that working excessive hours is associated with a range of negative impacts on physical and mental health, well-being, and productivity.

Moreover, many workers are unable to work overtime—due to care responsibilities, health needs, or other constraints—even if they want to. These workers shouldn’t be disadvantaged in the tax code.

“No tax on overtime” benefits employers and sets up new avenues for worker exploitation

There are clear benefits to employers from exempting overtime from taxes. By giving workers who receive overtime an after-tax pay boost—at no expense to employers—there would be less pressure on employers to reduce overwork or raise workers’ wages.

No tax on overtime would particularly benefit employers currently misclassifying staff as exempt from overtime. The FLSA exempts a variety of occupations from overtime, but the largest exemption is for “executive, professional, and administrative” workers (sometimes called the “white collar” exemption.) This was intended to exempt higher-paid workers who have sufficient bargaining power in their roles to exercise judgment over when and how much to work. To qualify for this exemption, employees must have certain job duties and be paid above a certain threshold of weekly pay, currently just $684 a week (the equivalent of $35,658 annually.) Both the Biden and Obama administrations attempted to raise this threshold, but those efforts have been held up in court after being undermined by the first Trump administration.

Because the salary threshold is so low, many workers earning relatively low salaries are required to work excessive hours for no additional compensation. Lawmakers could update overtime laws so that employers would need to pay these workers overtime (and some states have.) Instead, no tax on overtime would effectively give employers overworking low-salaried staff a free pass, allowing them to potentially assuage workers’ frustration without actually compensating them the overtime pay to which they should be entitled.

For instance, a worker being paid a $50,000 annual salary and regularly being asked to work 60 hours a week might accept their employer converting them to an hourly status at a fairly low hourly wage in order to access the preferential tax treatment on their overtime. Their employer could pay them about $13.75 per hour, and if they continued to work that 60-hour work week year-round, they’d get about $4,000 more in after-tax pay, while costing the employer nothing in additional compensation. In contrast, if that worker had been automatically eligible for overtime for those extra 20 hours each week—as they would have been under the Biden administration’s overtime rule—that same worker would have earned closer to $20,000 more in annual after-tax earnings had they maintained a 60-hour weekly schedule year-round.

An even more pernicious, though very plausible, version of this scenario would be employers proactively reclassifying overtime-exempt employees as hourly, scheduling them for overtime, and then paying them hourly wages such that they receive the same after-tax pay as before. In this scenario, workers would see no real tax benefit despite working extra hours, while their employer would benefit from reduced labor costs.

No tax on overtime is ripe for abuse by high earners, straining public budgets while further complicating the tax code

This same type of gaming that could exploit lower-paid salaried workers could also easily be used to give tax breaks to highly paid salaried workers, who already expect to work long hours. Any hourly, W-2 worker is eligible for overtime, no matter how much they earn. Employers could switch a highly paid executive to an hourly status and set their hourly wage so that, with overtime, they are being paid the same pre-tax salary as before—giving them an enormous tax windfall. As others have noted, it’s easy to imagine a corporate CEO being paid a $4,000 hourly wage and earning $6 million in overtime, which would not be taxed.

The loss in tax revenue resulting from these proposals would be significant. According to the Yale Budget Lab’s tax microsimulation model, even before taking into account potential gaming of the system, creating a federal income tax deduction for overtime would cost an estimated $866 billion over the next 10 years. If the overtime exemption were extended to payroll taxes, the cost rises to $1.3 trillion, 77% of which would have gone to Social Security.

For state governments, the losses would also be substantial. Personal income taxes are one of the most significant revenue sources for states, allowing state governments to fund schools, maintain roads and other public infrastructure, and pay for programs and services that families and communities depend on.

In 2023, Alabama became the first and only state to exempt overtime compensation from state taxes. The law, enacted in response to rising inflation, is scheduled to sunset in mid-2025. The Alabama exemption cost the state $230 million in the first nine months of 2024 alone and is projected to cost $345 million by the time it expires. Because income taxes are the largest source of revenue for public education in Alabama, the exemption denied millions in needed funding for the state’s Education Trust Fund. State officials explained that the true costs were more than $45 million higher than projected because the state lacked data on how much employers paid in overtime.

Further, fiscal analyses for 2025 bills in West Virginia and Virginia have estimated annual revenue losses at $70 and $121 million, respectively, in the first year alone. Given the limitations in existing overtime data, as in the case of Alabama, projections of the impact of overtime tax exemptions likely underestimate the actual costs of these proposals.

Exempting overtime from taxation would also make the tax code more complex, both for tax agencies to administer and for employers to follow. At the federal level, Internal Revenue Service (IRS) reporting requirements do not ask employers or employees to distinguish between regular pay and overtime pay. The IRS would have to modify tax forms for employers to report information on workers’ hours and delineate between regular wages and overtime earnings. State tax agencies would also need to revise accounting systems and potentially hire new staff to maintain accurate overtime records.

There are better ways to help workers facing long hours and low pay

The alleged motivation for exempting overtime from taxation is that workers should be rewarded in the tax code for their willingness to work extra hours. But, as described, those tax benefits are dubious if they’re accompanied by weaker base wages or cuts in public services on which workers and their families rely. If lawmakers are serious about helping these workers, there are much better options that wouldn’t exacerbate overwork or threaten public budgets.

To start, lawmakers could strengthen existing overtime laws in a variety of ways including:

• Increasing the overtime rate from 1.5 times base pay to 1.75 or even two times base wages. This would disincentivize employers from requiring excessive hours while making it a better deal for workers when they are asked to work overtime.
• Raising the decades-old overtime salary threshold to make more workers automatically eligible for overtime pay when they work more than 40 hours in a week.
• Ending racist carveouts that exclude agricultural workers and live-in domestic workers from overtime eligibility.
• Bolstering labor enforcement to stop employers from misclassifying workers as exempt from overtime compensation.

Lawmakers could also have overtime kick in earlier—say, after 32 or 35 hours worked per week. Not only would this satisfy broad public support for a shorter work week, but it would also help workers with care responsibilities. These workers would either gain more time to spend with children, family, and others, or if they maintained a 40-hour work week, they’d have extra earnings to help offset costs of child care, elder care, or other related needs.

The strongest policy lawmakers could enact to help working people would be labor law reforms that make it easier for workers to form unions. Having access to a union would help workers negotiate fair wage and hours policies with their employer, tailored to those workers’ needs and the needs of that business or industry.

In the end, exempting overtime from taxes is not a real pro-worker policy. Instead, it is a giveaway to businesses that would create new inequities in the tax code while expanding employer power and draining public budgets of resources for all the things—schools, infrastructure, safety, health—that workers, their families, and their communities actually need to thrive.

Our report shows that more than $1.5 billion in stolen wages were recovered for workers between 2021 and 2023. The report highlights wage theft recovery by the U.S. Department of Labor (DOL), state agencies, and class action litigation. Finally, the report recommends policy solutions to combat wage theft in the United States.

Background and prior studies

Wage theft is a costly and pervasive problem that affects millions of workers across the country. For example, Cooper and Kroeger (2017) investigated just one type of wage theft (minimum wage violations) and found that in the 10 most populous states in the country, 17% of eligible low-wage workers reported being paid less than the minimum wage, amounting to 2.4 million workers losing $8 billion annually. Extrapolating from these 10 states, Cooper and Kroeger estimated that workers throughout the country lose $15 billion annually from minimum wage violations alone. To put that into perspective, the latest data from the Federal Bureau of Investigations showed that robberies accounted for $598 million in losses in 2018 and $482 million in losses in 2019, totaling only $1.8 billion in a two-year period (Ed and Workforce 2024).

The personal cost of wage theft to these workers is significant: Cooper and Kroeger found that on average, the workers suffering from minimum wage violations in these 10 states were cheated out of $64 a week—about $3,300 annually for year-round workers. These workers lost almost one-quarter of their earnings, receiving on average only $10,500 in annual wages instead of the $13,800 they should have received.

Additionally, only a small portion of stolen wages are ever recovered on behalf of workers. A 2021 EPI report found that only $3.24 billion in stolen wages was recovered for workers in a four-year period (2017–2020) by DOL, state departments of labor and attorneys general, and class action litigation (Mangundayao et al. 2021).

Wage theft occurs in all industries and impacts workers at all income levels, especially low-wage workers. According to DOL, low-wage workers in construction, food service, health care, and retail experience high rates of wage theft. Temporary work is also among the low-wage industries with high violations of wage theft (DOL 2024b). One report finds that almost a quarter (24%) of temporary workers report experiencing wage theft from their employer by being paid less than minimum wage, failing to receive overtime pay, or failing to receive pay for all hours worked (NELP et al. 2022).

Findings and analysis

In this report, we seek to contribute to the understanding of wage theft by collecting and aggregating available data on recovery of stolen wages in the United States. In order to get as comprehensive a picture as possible of wage recovery across the United States, we reviewed current U.S. Department of Labor wage enforcement data, surveyed state labor departments and attorneys general, and reviewed data on class action litigation. 

Our analysis shows that $1.5 billion in stolen wages were recovered for workers from 2021 to 2023 by the U.S. Department of Labor, state agencies, and class action litigation. Crucially, however, this statistic is not representative of all wage theft in the United States because many workers will never file a claim to recover stolen wages. For example, Estlund (2018) estimates that 98% of low-wage, private-sector, nonunion workers subject to forced arbitration do not file a claim when their wages are stolen. Further, federal law does not require employers to provide workers with regular pay stubs, which means workers may not even know they are experiencing wage theft.

Wage recovery by the U.S. Department of Labor

According to Wage and Hour Division (WHD) enforcement data, DOL recovered $234.3 million for workers in fiscal year 2021, $213.1 million in fiscal 2022, and $212.3 million in fiscal 2023—for a total of $659.8 million across four years (Table 1). These wages were recovered on behalf of 510,534 workers, with an average of $1,292 in recovered wages per worker (WHD 2024).

Table 1

Wage recovery by state departments of labor and attorneys general

During the summer of 2024, EPI contacted state departments of labor and attorneys general via phone and email to compile data on their wage recovery efforts. We collected data, summarized in Appendix Table 1, from 34 states and the District of Columbia. The remaining 16 states either did not respond to our request, did not track the requested data, or were unable to provide the requested data.

According to our analysis, state departments of labor and attorneys general in 34 states and the District of Columbia recovered $53.1 million in 2021, $63.5 million in 2022, and $53.8.6 million in 20231—a total of $201.4 million recovered over those three years.2

Wage recovery through class action settlements

Based on research conducted by Seyfarth Shaw LLP (2022), the value of the top 10 wage and hour class action settlements totaled $641.3 million in 2021, as shown in Figure A. The total value of these class action settlements in 2021 is comparable to the value of DOL wage recovery efforts during the full three-year period that we report above.

This class action data illustrates that workers are more effective in recovering stolen wages on a collective versus individual basis. However, many workers are barred from joining class action cases, because they are subject to forced arbitration agreements. According to Colvin (2018), 56.2% of private-sector, nonunion workers are subject to forced arbitration agreements, which are more costly to workers than class action lawsuits. For example, Stone and Colvin (2015) find the typical award per worker in forced arbitration ($36,500) is only 21% of the median award in a class action lawsuit in the federal courts ($176,426).

Figure A

Case studies

Below, we provide some examples of wage theft recovery to illustrate the breadth of the problem across states and industries, and the efforts of state-wide worker protection agencies to combat wage theft.

U.S. Department of Labor

In January 2024, the U.S. Department of Labor recovered over $1.1 million in back wages and damages for 165 garment workers in Los Angeles. Four sewing contractors supplying goods to Beyond Yoga were found to have failed to pay overtime and falsified payroll records. Beyond Yoga agreed to pay the wages owed and entered into a compliance agreement to improve labor practices within its supply chain. The settlement was the largest for California garment workers to date (DOL 2024a).

Rhode Island: Department of Labor and Training

The Rhode Island Department of Labor and Training Adjunction Unit issued a Hearing Officer Decision to WL Builders LLC in December 2023. The decision confirmed that WL Builders LLC did not pay the required prevailing wage to 15 workers on three public works construction projects. The total wages and interest owed were $454,074.56 and the civil penalty was $ 414,074.56—for a total of $868,149.12 owed. In addition, WL Builders LLC misclassified 15 individuals working on the project (Turley 2024).

Illinois: Department of Labor and Attorney General

In July 2023, the Illinois Department of Labor and the Attorney General reached a settlement with a medical staffing agency that was illegally charging workers fees for missing work. The company had a practice of deducting “booking fees” when workers missed shifts. Under the settlement, GrapeTree Medical Staffing LLC agreed to pay approximately $950,000 in back wages and interest to around 3,000 current and former workers in Illinois (State of Illinois 2023).

Washington: Department of Labor and Industries

The Washington State Department of Labor and Industries (L&I) investigated a claim regarding workers who were performing aircraft maintenance overseas at the Boeing Company in 2022. This claim led to a larger investigation of the travel pay and benefits for workers in Washington state. L&I found that Boeing was not complying with Washington state wage and hour laws regarding overtime and paid sick leave related to out-of-town travel. In May 2024, L&I collected $11.5 million in back wages for 495 workers of Boeing Company as result of the investigation (Washington L&I 2024).

Policy recommendations

Federal solutions

Policymakers should increase the funding for DOL’s Wage and Hour Division. The WHD has not seen a significant increase in funding in over a decade (Rowland, Poydock, and Zhang 2024). In 2022, the average wage and hour investigator was responsible for safeguarding the earnings of almost triple the number of workers of their 1973 counterpart (Costa and Martin 2023). Additional funding and investigators will help the WHD effectively enforce the Fair Labor Standards Act and efficiently recover stolen wages. Further, the WHD should implement strategic enforcement strategies—focusing on industries with a history of high rates of wage theft violations and conducting proactive investigations and compliance sweeps in those industries. Strategic enforcement is effective in combatting wage theft by recovering wages for workers on a larger scale, while also deterring employers in those industries from stealing wages from workers (Weil 2010).

In addition to increased enforcement capacity, there is also a great need to inform workers of their rights under the law. The Wage Theft Prevention and Wage Recovery Act would help combat wage theft and empower workers to receive all the pay they are entitled to. The bill would increase transparency for workers by requiring employers to provide workers terms of their employment and regular paystubs. The bill also authorizes DOL to issue meaningful penalties for employers who commit wage theft. The bill would also allow DOL to issue grants to organizations and partners to help create outreach and education campaigns to inform workers of their rights under the law (Ed and Workforce 2023).

Finally, federal policymakers should pass legislation strengthening key labor standards to combat wage theft. Policymakers should eliminate the tipped minimum wage and create one federal minimum wage to raise wages for workers and facilitate the enforcement of minimum wage violations (Allegretto and Cooper 2014). Policymakers should also ensure all workers have the right to join in union and bargain collectively. Unionized workers are far less likely to experience wage theft, because their bargaining power provides them means of redress for and protections from wage theft. The Protecting Right to Organize Act would strengthen the right for private-sector workers to form unions and collectively bargain. The Public Service Freedom to Negotiation Act would establish a federal standard of collective bargaining rights for public-sector workers.

State and local efforts

As we illustrate in this report, state agencies and attorney generals are key enforcers in combatting wage theft on the state and local levels. The examples above highlighted efforts made by state and local governments to deter wage theft and efficiently recover stolen wages for workers.

While federal legislation to combat wage theft has stalled, many states have enacted laws to prevent wage theft by providing workers with greater transparency on their terms and conditions of employment. For example, 41 states have enacted laws that require employers to provide their workers with regular pay stubs (Paystub.org 2023).

Many states have strengthened penalties for wage theft violations, enforcing them as criminal statutes. For example, Minnesota and South Dakota classify violations of wage theft laws as misdemeanors, while California, Hawaii, New Jersey, New York, and Rhode Island classify such violations as felonies.3 California and New York designate willful violations as grand theft or larceny, and in New Jersey, the state has the power to impose jail time to employers who violate wage and hours laws (Hacker et al. 2023).4 Enforcing wage and hour laws as criminal statutes imposes more expensive fines and longer potential prison sentences on employers who violate wage and hour laws, which can serve as a powerful deterrent for other employers.

Some states have established laws allowing victims of wage theft to obtain a lien on employer property to ensure payment of back pay. This is designed largely to stop the practice of employers selling or dissolving a business after committing wage theft only to reconstitute as a new business entity shortly thereafter and never pay the wages owed (NELP 2011). Maryland and Washington are examples of states that have enacted such laws (Bushaw 2021).

Some localities have established funds specifically to help workers who are victims of wage theft. For example, San Diego County leaders in California reported progress in combating wage theft, highlighting the success of the Workplace Justice Fund and the Office of Labor Standards and Enforcement. The fund provides financial aid to workers awaiting back pay and supports broader collaboration to hold employers accountable (DeFore 2024). In New York City, Manhattan District Attorney Alvin Bragg announced the creation of the Worker Protection Unit to combat wage theft and unsafe work conditions (Manhattan DA 2023). This unit will prosecute individuals and corporations exploiting workers and includes the establishment of a Stolen Wage Fund to aid victims.

Conclusion

Wage theft is a costly and pervasive problem that impacts millions of workers across the country. More than $1.5 billion in stolen wages were recovered for workers by U.S. Department of Labor, state agencies, and class action lawsuits between 2021–2023. Federal, state, and local lawmakers should pursue policies that prevent and combat wage theft to ensure workers receive all wages they are owed.

Acknowledgements

The authors thank the Notre Dame Student Policy Network (SPN) for their contributions in the background research of this report. The authors would like to thank Alex Young and Annie Chen for leading the SPN team, which includes Tess Barrett, Billy Bonnist, Max Feist, Hannah Huston, Emi Kartsonas, Ashleigh Lobo, and Darren Tanubrata.

Appendix

Appendix Table 1

Notes

1. Note that 2023 totals include some data from 2024, as some states tracked wage recovery efforts by fiscal year instead of calendar year.

2. Total recovery amounts include three states (Idaho, Kentucky, and New Jersey) who provided data on total recovery efforts, but not recovery by year. See Appendix Table 1 for full data.

3. Labor and Employment, S.D. Codified Laws §§ 60-11-15 (South Dakota Legislative Research Council 2008).; Wage Theft, Minn. Stat. §§ 3-6 (Department of Labor and Industry 2018); Wage and Hour Law, Haw. Rev. Stat. §§ 387-12; Payment of Wages, R.I. Gen. Laws §§ 28-14-17.; Wage and Hour Act, N.J. Stat. Ann. §§ 34:11-58.6.

4. Offenses Involving Theft, N.Y. Penal Law §§ 155-05; Of Crimes against Property, Cal. Penal Code §§ 5-487.

References

Allegretto, Sylvia, and David Cooper. 2014. Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage. Economic Policy Institute, July 2014.

Bureau of Labor Statistics (BLS). 2024. “Table 3. Employees on Nonfarm Payrolls by State and Selected Industry Sector, Seasonally Adjusted.” Local Area Unemployment Statistics (LAUS). Last modified November 19, 2024. 

Bushaw, Emily A. 2021. “New Washington Law Creates Statutory Wage Lien for Claims on Unpaid Wages.” Perkins Coie, June 24, 2021.

Colvin, Alexander J. S. 2018. The Growing Use of Mandatory Arbitration: Access to the Courts Is Now Barred for More Than 60 Million American Workers. Economic Policy Institute, April 2018.

Cooper, David, and Teresa Kroeger. 2017. Employers Steal Billions from Workers’ Paychecks Each Year. Economic Policy Institute, May 2017.

Committee on Education and the Workforce, Democrats (Ed and Workforce). 2023. “Wage Theft Prevention and Wage Recovery Act” (fact sheet). September 2023.

Committee on Education and the Workforce, Democrats (Ed and Workforce). 2024. A Slap on the Wrist: How It Pays for Unscrupulous Employers to Take Advantage of Workers. April 2024.

Costa, Daniel, and Philip Martin. 2023. Record-Low Number of Federal Wage and Hour Investigations of Farms in 2022: Congress Must Increase Funding for Labor Standards Enforcement to Protect Farmworkers. Economic Policy Institute, August 2023.

DeFore, Tracy. 2024. “County Leaders Report Progress Fighting Wage Theft.” County News Center, March 19, 2024. 

Department of Labor (DOL). 2024a. “Department of Labor Recovers $1.1M for 165 Garment Workers After Sewing Contractors Withheld Overtime Wages, Falsified Records” (press release). January 3, 2024.

Department of Labor (DOL). 2024b. “Low Wage, High Violation Industries” (web page). Accessed December 3, 2024.

Department of Labor, Wage and Hour Division (WHD). 2024. “All Acts” (web page). Accessed December 3, 2024.

Estlund, Cynthia. 2018. “The Black Hole of Mandatory Arbitration.” North Carolina Law Review 96, no. 3: 679–710.

Hacker, Chris, Ash-har Quraishi, Amy Corral, and Ryan Beard. 2023. “Wage Theft Often Goes Unpunished Despite State Systems Meant to Combat It.” CBS News, June 30, 2023.

Mangundayao, Ihna, Celine McNicholas, Margaret Poydock, and Ali Sait. 2021. More Than $3 Billion in Stolen Wages Recovered for Workers Between 2017 and 2020. Economic Policy Institute, December 2021.

Manhattan District Attorney’s Office (Manhattan DA). 2023. “D.A. Bragg Announces Creation of Office’s First ‘Worker Protection Unit’ to Combat Wage Theft, Protect New Yorkers from Unsafe Work Conditions” (press release). February 16, 2023.

National Employment Law Project (NELP). 2011. Winning Wage Justice: An Advocate’s Guide to State and City Policies to Fight Wage Theft. January 2011.

National Employment Law Project (NELP), Warehouse Workers for Justice, North Carolina Justice Center, New Labor, Mississippi Workers’ Center for Human Rights, Chicago Workers Collaborative, and Temp Worker Justice. 2022. Temp Workers Demand Good Jobs. February 2022.

Paystub.org. 2023. “The Complete Guide to Pay Stub Requirements by State” (web page). Published June 30, 2023.

Rowland, Catherine, Margaret Poydock, and Jiayi (Sonia) Zhang. 2024. “Proposed Cuts to Worker Protection Agencies and What They Mean” (fact sheet). Congressional Progressional Caucus Center and Economic Policy Institute, July 15, 2024.

Seyfarth Shaw LLP. 2022. 18th Annual Workplace Class Action Litigation Report. January 2022.

State of Illinois. 2023. “Attorney General Raoul Reaches Settlement with Medical Staffing Agency Charging Employees Fees for Missing Work” (press release). July 6, 2023.

Stone, Katherine V. W., and Alexander J. S. Colvin. 2015. The Arbitration Epidemic: Mandatory Arbitration Deprives Workers and Consumers of Their Rights. Economic Policy Institute, December 2015.

Turley, Elizabeth. 2024. “Construction Company Owes $869K in RI Wage Theft Case.” WPRI, March 4, 2024.

Washington State Department of Labor & Industries (Washington L&I). 2024. “Boeing Pays Millions in Wages After L&I Starts Investigation.” May 3, 2024.

Weil, David. 2010. Improving Workplace Conditions Through Strategic Enforcement: A Report to the Wage and Hour Division. Boston University, May 2010.

Meanwhile, this week the Biden administration announced four long-awaited protections for workers that have been EPI policy priorities:  

On Monday, the Centers for Medicare and Medicaid Services for the first time issued a final rule requiring nursing homes to provide minimum hours of nursing care per resident (3.48 hours) and to have a registered nurse available around the clock. In addition to protecting residents, the rule will improve the lives of underpaid and overworked nursing home workers and reduce staff turnover that exceeds 50% annually.

Taxpayers pay for 71% of long-term services and supports, mostly in the form of Medicaid and Medicare spending on nursing home care. But there was no federal standard requiring nursing homes to provide minimum hours of care per resident until the Biden administration followed through on a pledge to curb abuses by for-profit operators who dominate the industry (government and non-profit homes provide better care). The industry lobby fiercely contested the rule, claiming a shortage of workers—a claim belied by the fact that nursing homes pay less than other health care providers (a real shortage of workers would drive up pay).

On Tuesday, the Federal Trade Commission (FTC) issued a final rule banning most noncompete agreements for workers. Employers justify noncompete agreements that tie workers to specific employers as a means of protecting trade secrets, but most affected workers do not have access to proprietary information or they are covered by nondisclosure agreements. Noncompete agreements, which now cover at least 30 million workers according to research by EPI and others cited by the FTC, suppress wages by making it hard for workers to move to better jobs, and squelch competition by preventing workers from starting businesses.

Also on Tuesday, the Department of Labor (DOL) issued a final rule raising the minimum salary threshold for workers who can be exempt from earning overtime pay. The threshold will be raised in two steps to $58,656 for full-time workers, after which it will be adjusted every three years. In research cited by DOL, EPI found that the threshold covered 63% of salaried workers in 1975 but only 9% in 2023. DOL and EPI estimated that roughly 4 million workers—disproportionately women and workers of color—will be helped by the new rule.

In a third Tuesday announcement, DOL issued a final rule closing loopholes in rules protecting retirement savers from conflicts of interest in investment advice. The rule ensures that advice offered on rollovers to Individual Retirement Accounts, advice on the sale of insurance products, and advice to retirement plan sponsors is in the best interest of retirement savers, in line with rules protecting retirement savers from conflicted advice in other contexts. Like the overtime rule, this rule has been many years in the making. An Obama-era rule extending fiduciary protections to retirement savers was delayed by the Trump administration and subsequently overturned by the conservative Fifth Circuit Court of Appeals. The Securities and Exchange Commission stepped in with a “Best Interest” rule, but left gaps exploited by unscrupulous financial professionals—in part due to jurisdictional limits that, for example, allowed insurance companies to market costly and complex annuities to vulnerable seniors, at an estimated cost to retirement savers of $5.5 billion or more per year (total savings from the rule are hard to assess but much higher).

These common-sense actions will improve protections for workers and are important steps toward creating a fair and sustainable economy.

How the overtime threshold works

Overtime pay protections are included in the Fair Labor Standards Act (FLSA) to ensure that most workers who put in more than 40 hours a week get paid 1.5 times their regular pay for the extra hours they work. Almost all hourly workers are automatically eligible for overtime pay. But workers who are paid on a salary basis are only automatically eligible for overtime pay if they earn below a certain salary. Above that level, employers can claim that workers are “exempt” from overtime pay protection if their job duties are considered executive, administrative, or professional (EAP)—essentially managers or highly credentialed professionals.

The current overtime salary threshold is too low to protect many workers

The pay threshold determining which salaried workers are automatically eligible for overtime pay has been eroded both by not being updated using a proper methodology, and by inflation. Currently, workers earning $684 per week (the equivalent of $35,568 per year for a full-time, full-year employee) can be forced to work 60-70 hours a week for no more pay than if they worked 40 hours. The extra 20-30 hours are completely free to the employer, allowing employers to exploit workers with no consequences.

The Department of Labor’s new final rule will phase in the updated salary threshold in two steps over the next eight months, and automatically update it every three years thereafter.

• Effective on July 1, 2024, the salary threshold will be raised to $844 per week.
  • This is the equivalent of $43,888 per year for a full-time, full-year worker.
  • In 2019, the Department updated the salary threshold to a level that was inappropriately low. Further, that threshold has eroded substantially in the last 4+ years as wages and prices have risen over that period, leaving roughly one million workers without overtime protections who would have received those protections under the methodology of even that inappropriately weak rule. This first step essentially adjusts the salary threshold set in the 2019 rule for inflation.
• Effective on January 1, 2025, the salary threshold will be raised to $1,128 per week.
  • This is the equivalent of $58,656 per year for a full-time, full-year worker.
  • This level appropriately sets the threshold at the 35th percentile of weekly wages for full-time, salaried workers in the lowest-wage Census region, currently the South.
• The salary threshold will automatically update every three years thereafter, based on the methodology laid out in the rule, to ensure that the strength of the rule does not erode over time as prices and wages rise.

The final rule will benefit 4.3 million workers

• 2.4 million of these workers (56%) are women
• 1.0 million of these workers (24%) are workers of color
• The largest numbers of impacted workers are in professional and business services, health care and social services, and financial activities.
• The 4.3 million represents 3.0% of workers subject to the FLSA.

Expanding overtime protections is good for workers and manageable for employers

• The final rule will result in a transfer of $1.5 billion annually from employers to workers in increased pay.
• While that increase in wages will be enormously impactful to affected workers, it represents well under one-tenth of one-percent of total wages and salaries in the U.S. economy. Employers will be more than able to adjust to the rule without negatively impacting the overall economy.
• In addition to increasing pay for many workers, the overtime rule will also reduce excessive hours of unpaid work. Before this update to the salary threshold, the cost to employers of overworking salaried EAP workers who make more than $684 weekly was effectively zero. The concept of overtime pay is designed to protect workers’ most valuable asset—their time—and to push employers to value it too.
• Automatic updating is a smart and easy way to simply maintain the labor standard established in the proposal. If the threshold is not updated automatically over time, it will steadily weaken as a labor standard until the next rulemaking, covering fewer and fewer workers as the salary distribution naturally rises over time with inflation and productivity growth.
• With automatic updating, employers will know exactly what to expect and when to expect it. They will also be able to get a reasonable sense well in advance of what the next threshold will be, because they will be able to track on a dedicated Bureau of Labor Statistics website how the 35th percentile of full-time salaried worker earnings in the lowest-wage Census region is evolving over time.

“We are thrilled to see the final rule issued to update overtime protections under the Fair Labor Standards Act. This action is projected to give overtime protections to 4.3 million workers and increase the wages of working people by $1.5 billion annually. Further, the rule is an important step toward correctly valuing one of the most precious resources workers have—their time,” said EPI President Heidi Shierholz. “This rule is an essential milestone in creating a stronger, fairer economy.”

When the rule is fully phased in—which will happen over the next eight months—salaried workers making less than $1,128 per week ($58,656 per year for a full-time, full-year worker) would become automatically eligible for overtime pay at a rate of time and a half when they work more than 40 hours in a week, even if they are a manager, supervisor, or highly credentialed professional (also called an EAP employee). The final rule will also automatically update the threshold every three years to ensure that the threshold’s protection does not diminish as prices and wages in the economy rise.

The overtime threshold has not been properly updated for nearly 50 years, leaving millions of workers who should be covered without basic overtime protections under the Fair Labor Standards Act. Currently, a worker making just $36,000 a year can be required to work 50- or 60-hour work weeks with no additional pay. This proposal would ensure that employers have “skin in the game” when they ask these workers to work long hours. And as a result, these workers will either get those extra hours back or they will get higher wages when they do work long hours—whether through salary increases or by earning time-and-a-half overtime pay. 

As former Chief Economist at the U.S. Department of Labor from 2014–2017, Shierholz worked closely on the Department’s economic impact analysis for the 2016 overtime regulations that would have extended and strengthened overtime protections for millions of workers. Unfortunately, that regulation was first challenged in court by both conservative state attorneys general and by the business lobby, overturned by a Texas district court judge, and then was ultimately replaced by a weaker standard under the Trump administration.

Read EPI’s latest analysis and public comment in support of the proposed version of the new rule.