New federal overtime-pay standards take effect

Government Watch: The exemption for salaried workers is narrowed to employees earning less than $43,888 a year. Also, DOL pushes for a paid-leave model, and foie gras remains legal in NYC.
The new standards took effect July 1. | Photo: Shutterstock

Government WatchWelcome to Government Watch, a weekly Restaurant Business column focused on regulatory, legislative, labor and other governmental issues of relevance to the restaurant industry. Because of the Fourth of July holidays, it appears earlier than normal this week.

Salaried restaurant employees earning $43,888 or less annually will now be entitled to overtime pay for worked hours exceeding 40 per week, the result of an update, effective today, of U.S. Department of Labor (DOL) regulations.  

Until yesterday, salaried employees were exempted from federal overtime requirements if they earned $35,568 or more per year. The broadened scope will entitle about 1 million more workers across all industries to time-and-a-half pay for hours exceeding 40 per week, according to DOL.

The threshold rises again on Jan. 1, to $58,656. The DOL is empowered to adjust the exemption trigger every three years thereafter.

“This rule helps ensure that more lower-paid salaried workers who should receive overtime protections under the law actually receive those protections,” Acting DOL Secretary Julie Su said in a statement. “That means more money in these workers’ pockets and a little more breathing room.”

Eligibility has already been raised significantly above the federal level in California as the result of AB 1228, the same state law that created the California Fast Food Council. The legislation raised the minimum wage for most fast-food workers in the state to $20 an hour. Because state regulations provide an exemption from overtime pay only to salaried workers earning twice the minimum wage, a fast-food manager or other employee on salary is entitled to the premium pay if they earn less than $83,200. The exemption had been much broader, extending to anyone making less than $66,563. That threshold is still in place for salaried employees of full-service restaurants.

A business coalition that includes the National Restaurant Association’s legal arm and the Texas Restaurant Association had filed a lawsuit in a U.S. District Court to halt adoption of the new overtime standard. The suit contends among other things that the DOL puts too much emphasis on income when determining who’s ineligible for overtime pay, instead of giving more consideration to the duties a salaried employee performs.

Although that effort failed to pre-empt adoption of the new standard, it remains to be seen how a legal challenge might fare following last week’s landmark ruling by the U.S. Supreme Court in a dispute known as the Chevron case. The nation’s highest court in effect ruled that federal courts should not assume that the distillation of legislation into rules and regulations by an executive-branch agency like the DOL is per se in line with Congress’ objectives. Rather, the Supreme Court decided, a lower court should consider whether the do’s and don’ts from an agency veered from Congress’ aim.

The decision could put teeth into any legal challenge of rules an agency sets on the basis of legislation.

DOL beats the drum for federal paid leave

The U.S. Department of Labor hosted a pep rally last week for development of a federal system for granting paid family and medical leave, underscoring the Biden administration’s intentions of making the benefit a standard perk for restaurant employees and other American workers.

About 200 policymakers participated in the gathering, which was intended to keep the issue of paid leave front and center. President Joe Biden called as part of his fiscal 2025 budget for creating a program under the auspices of the U.S. Social Security Administration for granting employees up to 12 weeks of paid leave for dealing with an illness or a milestone familial event, like a child’s birth or a health crisis involving a close family member.

Unpaid leave is already mandated under the 1993 federal Family Leave and Medical Act for all employees of companies with at least 50 employees working within 75 miles of their workplace. Thirteen states and the District of Columbia mandate paid leave from employers, but there is no nationwide requirement.

While the White House has called for engineering a coast-to-coast system for providing paid leave, the particulars have yet to be determined.

“Having a paid leave law on the books is not enough,” Wendy Chun-Hoon, director of DOL’s Women’s Bureau, said in a statement. “The design of the program and the way in which it’s implemented also need to be equitable.” 

Among the presentations was a review by the University of California-Los Angeles’ World Policy Analysis Center of promising paid-leave programs for the U.S.

NYC foie gras ban is shot down

A New York court has blocked New York City’s ban on the sale of foie gras, ensuring the delicacy will remain on the menus of select fine-dining establishments.

The City Council passed the ban five years ago, contending that the pricey goose liver was produced in inhumane fashion. Proponents argued that the geese were constrained and force-fed materials foreign from their natural diets to meet the demand.

Poultry farmers from the Hudson Valley challenged the law, arguing that the assertions of animal cruelty were unfounded.

Correction: An earlier version of this story erroneously identified the Supreme Court of New York as the state's highest court, when in fact it is at the lowest tier. 

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