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Feds change pay rules for restaurant managers

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Salaried restaurant employees who work more than 40 hours in a week will be entitled to overtime pay as of Dec. 1 unless they earn more than $47,476 annually, the result of a rules change announced last night by the U.S. Department of Labor.

The threshold that will make management employees exempt from overtime requirements is roughly double the current level—the equivalent of $913 per week, versus $455, or $23,660 annually.

The level will automatically reset every three years to match “wage growth rates,” Labor said.

The steep hike is intended to instantly raise the income of about 4.2 million members of the middle class. It is not clear how many of the beneficiaries work in the restaurant business.

After the new rules take effect Dec. 1, restaurants and other employers will have four options in dealing with salaried employees—in the restaurant business, a group consisting almost exclusively of management-level people.

If a manager or assistant manager works more than 40 hours, as many routinely do, restaurant employer will either have to:

  • Pay time and a half for every hour exceeding 40 hours, as they almost never do today;
  • Raise the salary of an individual paid less than $47,476 above that level;
  • Reduce the number of hours the manager works; or
  • Use a combination of those strategies.

The International Franchise Association reported this morning that the rules, still not widely distributed, will also allow employers to count bonuses and commissions for as much as 10 percent of a salaried employee's income.

In an interview last week, Cicely Simpson, the chief lobbyist for the National Restaurant Association, cited changes in the overtime regulations as the association’s top governmental concern.

However, the NRA noted that Labor heeded its requests to base overtime eligibility on income rather than a so-called long duties test, whereby managers who shouldered duties usually handled by hourly workers could be entitled to overtime. The industry had pointed out that managers routinely fill in for hourlies who don’t show for their shifts, or help out the crew during crunch periods by assuming such tasks as clearing tables or running meals out to guests.

The NRA and individual restaurateurs had argued that deciding what constituted managerial duties in a restaurant and how non-managerial hours would be computed would lead to costly litigation and strain employer-employee relations.

The business community also noted that Labor backed away from its original proposal of using $57,000 per year as the salary threshold for exemption from overtime rules.

In addition, many employers had fretted that they’d be given only 60 or 120 days to comply with the new requirement. Labor provided more than six months.

Despite the concessions, the NRA blasted the new rules as a measure that will ultimately hurt restaurant employees as much as restaurants.

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