Washington Restaurant Market Watch: Overtime pay proposal could have big impact on restaurants

Washington Restaurant Market Watch: Overtime pay proposal could have big impact on restaurants

By Paul Schlienz

Policies have consequences. In the case of President Barack Obama’s June 29 proposal for new overtime rules, the impact on restaurants could be enormous.

Under the new rules, doubling the threshold for overtime eligibility, nearly 5 million additional restaurant workers and managers could gain eligibility for overtime pay.

The rules could significantly impact the restaurant industry and operators’ labor costs. Like any business, restaurants rely on salaried staff and compensate these positions accordingly. Overtime pay to salaried employees earning less than $50,440 per year ($970 per week) will be guaranteed under the new rule. The current threshold is $23,660. Additionally, in the future, the salary threshold would be automatically updated based on inflation or wage growth. The U.S. Department of Labor (DOL) is also soliciting comments on whether a new “duties test” regarding exempt managerial employees is needed although nothing along these lines has been proposed.

“While we are still reviewing the Department of Labor’s proposed overtime regulations, at first sign, it seems as if these proposed rules have the potential to radically change industry standards and negatively impact our workforce,” Angelo Amador, senior vice president of labor and workfo

By Paul Schlienz

Policies have consequences. In the case of President Barack Obama’s June 29 proposal for new overtime rules, the impact on restaurants could be enormous.

Under the new rules, doubling the threshold for overtime eligibility, nearly 5 million additional restaurant workers and managers could gain eligibility for overtime pay.

The rules could significantly impact the restaurant industry and operators’ labor costs. Like any business, restaurants rely on salaried staff and compensate these positions accordingly. Overtime pay to salaried employees earning less than $50,440 per year ($970 per week) will be guaranteed under the new rule. The current threshold is $23,660. Additionally, in the future, the salary threshold would be automatically updated based on inflation or wage growth. The U.S. Department of Labor (DOL) is also soliciting comments on whether a new “duties test” regarding exempt managerial employees is needed although nothing along these lines has been proposed.

“While we are still reviewing the Department of Labor’s proposed overtime regulations, at first sign, it seems as if these proposed rules have the potential to radically change industry standards and negatively impact our workforce,” Angelo Amador, senior vice president of labor and workforce policy and regulatory counsel for the National Restaurant Association, said in a statement. “Supporters of these regulations say they want to increase Americans’ take-home pay, but these sweeping changes to the rules could mean anything but. More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions and move up with new performance-based incentives. If these regulations stand, that mobility and adaptability of employee schedules, which makes our industry appealing, will be severely diminished.”

Potentially, rising through the ranks of a restaurant is going to become more difficult, thanks to this ruling.

“Promoting someone to manager is going to be an expensive proposition for many small businesses and the result will be less mobility and fewer opportunities for workers at the bottom,” Beth Milito, senior legal counsel with the National Federation of Independent Business, told USA Today.

“The regulations being changed [on June 29] were modernized in 2004 to specifically recognize the unique rule that supervisors in restaurants must perform and the exceptional career advancement opportunities that restaurants provide to hourly workers,” Rob Green, National Council of Chain Restaurants executive director, said in a statement. “If allowed to stand, the one-size-fits-all proposal issued today will harm chain restaurant managers’ career advancement, eliminate key management positions, and have a negative impact on customer service and workplace morale,” Green said. “We need policy that encourages workplace advancement and this is a step in the wrong direction.”

The DOL will soon publish its proposal in the Federal Register. The publication will start a 60-day public comment period. The final rules will likely be released in 2016.

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