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National Restaurant Association - 4 ways changes in overtime regulations could hurt restaurants

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4 ways changes in overtime regulations could hurt restaurants

Serious concerns remain about how the Department of Labor's proposed overtime revisions could impact restaurant operations and opportunity for employees. 

It’s unclear when the final regulations will be released, but the Obama Administration has said the revisions are a top priority. More than 1,500 restaurant professionals and the National Restaurant Association submitted comments on the proposed revisions.

The House Small Business Committee, Subcommittee on Investigations, Oversight and Regulations held a hearing recently on how the change in overtime regulations could impact small business owners and employees. Kevin Settles, owner of Bardenay Restaurants and Distilleries, with three locations in Idaho, testified on behalf of the National Restaurant Association and gave four areas of concern about the proposed overtime revisions:

The potential for a new “duties test": Perhaps the biggest concern for restaurants is that the DOL may make major changes to the “duties test,” rigid guidelines that define the types of employees who must be paid overtime. While no specific changes have been proposed, the DOL did leave open the possibility that changes could be included in the final regulations. That’s worrisome for restaurants, as it’s common for restaurant managers to occasionally step outside of traditional management responsibilities and fill non-managerial roles depending on the needs of the restaurant. “Our managers need to have a hands-on approach to ensure that our operations run smoothly,” Settles said.

Salary threshold: Under the DOL’s proposal, the salary threshold for exemption from overtime would go from $23,660 to $50,440—a 113 percent increase. The sharp increase could come at a significant cost for both employers and employees, Settles said. “The exempt salary status was originally created to allow for above-average fringe benefits, greater job security, and better opportunities for advancement,” Settles said. “Setting a rate that is inappropriate for entry-level managers…will end up reducing benefits available to them.” The high threshold may be appropriate for some restaurants in more expensive areas of the country, but it means many salaried managers in rural areas would be unlikely to ever reach the exemption, he said.

Automatic threshold increases: Currently, the DOL is required to allow the public to weigh in on any proposed increases to the exemption threshold. That could change, as the DOL has proposed automatically increasing the threshold each year, without allowing input. “The department is charged with regular review and update of the minimum salary level and they acknowledge that they have not done this,” Settles said. “The reason they give is the ‘overall agency workload’ and the time-intensive nature of the notice and comment process have hindered the department’s ability to achieve this goal. I take this to mean that they are willing to put a key task for the department on auto-pilot at the expense of employers and employees.”

Not enough time for review: The NRA, many restaurateurs, and the U.S. Small Business Administration Office of Advocacy had requested that the DOL give them more time to review the proposed revisions. However, those requests were denied. “More time would have enabled our industry to better assist the department in gathering substantive and more accurate information on the impact the proposed revisions would have on the nation’s employers,” Settles testified.

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