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 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 immediate legislative efforts to defund, block or nullify the rule. We will also evaluate potential litigation against the DOL over its process for issuing the final rule and some of its mandates. The National Restaurant Association, which is a partner of the Ohio Restaurant Association, 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.
What do the DOL rules entail?
According to the White House fact sheet, the new federal overtime rule will go into effect Dec. 1, 2016. Further details will be available in DOL regulations and technical guidance. Based on what we know now, 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