On Nov. 22, 2016, a federal district court judge put a temporary nationwide halt on a Department of Labor federal overtime regulation that had been scheduled to take effect Dec. 1, 2016. The judge must now rule on two legal challenges to the regulation. Timing remains uncertain.
What's in the rule
The DOL regulation that was set to take effect Dec. 1, 2016, outlined the following changes to existing federal overtime rules:
Guarantee time-and-half pay to any salaried employee earning under $47,476 a year ($913 a week) and who works more than 40 hours in a week. That’s double the current salary threshold of $23,660 ($455 a week).
Starting Jan. 1, 2020, automatically update the salary threshold every three years, tying it to the 40th percentile of full-time salaried workers in the lowest-income Census region (currently the South). Based on current wage trends, the DOL projects a salary threshold of more than $51,000 by Jan. 1, 2020.
Make no changes in the duties tests used to determine whether a salaried employee above the threshold is considered an executive, administrative or professional employee and thus exempt from overtime pay.
For the first time, allow certain bonuses and incentive payments to count toward up to 10 percent of the new salary level.
Department of Labor compliance information. Fact sheets, Q&A, final regulation, and more.
Webinar recording and Powerpoint (Dec. 1, 2016) The NRA's Angelo Amador and Shannon Meade led webinar to assess possible next step on the overtime issue in the courts, Congress and a new Administration.
Webinar recording and Powerpoint (Nov. 10, 2016): The NRA's Shannon Meade, director of labor and workforce policy, joined Alex Passantino, partner at Seyfarth Shaw, to provide an overview of the final regulations.
Webinar recording and PowerPoint (May 26, 2016): The NRA's Angelo Amador, senior vice president and regulatory counsel, joined Alex Passantino, partner at Seyfarth Shaw, for an overview of the regulations.
Workshop presentation on the new overtime rules. Illinois Restaurant Association (June 21, 2016).
Insights: In-depth discussion of the new rule, Littler Mendelson. (May 31, 2016)
The National Restaurant Association issued a press statement, "Overtime Rule Will Harm Restaurant Employees," in reaction to the new rule.
We noted we are appreciative that the DOL appeared to listen to restaurants’ concerns and did not include the burdensome “long” duties test that would have led to increased contentious disputes and litigation--something the DOL stated it wanted to avoid. However, the threshold for exempt employees in the final regulations is still too high.
Restaurants operate on thin margins with low profits per employee and little room to absorb added costs. More than doubling the current minimum salary threshold for exempt employees, while automatically increasing salary levels, will harm restaurants and the employer community at large.
More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions and move up with performance-based incentives. These regulations may mean that salaried employees, who have worked hard to get where they are, could be subject to becoming hourly employees once again.
In July, Democratic Rep. Kurt Schrader (Ore.) became the latest lawmaker to move to either change or block the overtime rule. His bill would allow for a three-year phase-in period of the new salary threshold and eliminate automatic indexing. The NRA supports Congressman Schrader's bill.
The DOL moved ahead with these regulations despite widespread opposition. Hundreds of lawmakers have joined with employer and nonprofit groups in criticizing DOL for failing to accurately estimate the rule’s impact.
We expect continuing legislative efforts to defund, block or nullify the rule, as well as possible litigation against the DOL over its process for issuing the final rule and some of its mandates. The NRA has been a leading force in D.C. on this issue and will continue to use all available legislative and legal options to block a damaging rule.