President Obama said he is changing the salary threshold that determines who is eligible for overtime compensation, a move that will likely increase the number of restaurant managers who qualify for time-and-a-half pay when they work more than 40 hours per week, as many routinely do.
Currently, the annual salary threshold is $23,660. Workers with management responsibilities falling above that level typically qualify as “exempt employees,” or those who do not qualify for the mandated overtime pay schedule because they earn a management-scale salary. The President said last night in a posting on The Huffington Post blog site that he will raise the benchmark to $50,440. He states in the post that five million managers will likely see their take home rise as a result.
“That's how America should do business,” the President wrote. “In this country, a hard day's work deserves a fair day's pay. That's at the heart of what it means to be middle class in America.”
Even a moderate expansion of overtime eligibility could cost restaurants and retailers an additional $5 billion in labor costs, according to the National Council of Chain Restaurants.
The President’s plan is technically a proposed rule change, subject to comment from any and all sources. The plan has yet to be published by the U.S. Department of Labor, but economists and media analysts treated the President’s intentions as a done deal.
“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, the National Restaurant Association’s SVP of labor and workforce policy and regulatory counsel, said in a statement released this morning. “As with previous policies put forth by this Administration, we are deeply concerned with the outcome this process will have on the employer community and our employees.”
If the President’s plan is adopted, many pundits and analysts expect it to be challenged in court and the Republican-controlled Congress.
President Obama did not specify when the new threshold would go into effect.
Obama said he will spell out the details of the change this week in Wisconsin. Gov. Rick Scott is seeking the Republican Party’s nomination as its presidential candidate for 2016. Several Democratic Party aspirants, including Vermont Sen. Bernie Sanders and Maryland Gov. Martin O’Malley, have already pledged to expand the number of managers who qualify for overtime.
Current regulations also set a “primary duties” test to determine who is exempt from overtime pay. The rules specify that a salaried employee does not qualify if he or she executes duties that are primarily executive, professional or administrative in nature. Because restaurant managers routinely help hourlies with such tasks as bussing tables, delivering meals or even helping out in the kitchen, many have sued their foodservice employers, seeking overtime pay.
“Supporters of these regulations say they want to increase Americans’ take-home pay, but these sweeping changes to the rules could mean anything but,” the NRA’s Amador said. “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.”
The President had directed the U.S. Department of Labor several months ago to update the rules governing overtime pay. In testimony before Congress, restaurant-industry representatives agreed that an update of the Great Depression-era laws was necessary, but urged lawmakers to reflect the realities of the business.