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National Restaurant Association - Labor Department unveils overtime rule

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Labor Department unveils overtime rule

The Department of Labor  unveiled final federal overtime regulations May 18.

The new federal overtime rule will go into effect Dec. 1, 2016, according to a White House fact sheet and DOL compliance information. The final rule will be published in the May 23 Federal Register. The rule:

  • Guarantees 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).
  • Automatically updates 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). The first update would be Jan. 1, 2020. Based on current wage trends, the DOL projects a salary threshold of $51,000 by Jan. 1, 2020.
  • Makes 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, allows certain bonuses and incentive payments to count toward up to 10 percent of the new salary level.

National Restaurant Association reaction

The NRA noted in a statement that 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.

Opposition will continue

The DOL moved ahead with this final regulation 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 immediate 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.

NRA analysis and webinar

We will provide our members with an initial analysis of the rule this week, followed by a webinar Thurs., May 26, 3 p.m. ET. The webinar will be hosted by attorneys Angelo Amador, senior vice president and regulatory counsel at the NRA, and Alex Passantino, partner at Seyfarth Shaw and former Acting Administrator of the U.S. Department of Labor’s Wage and Hour Division.

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