Overtime pay to be extended to salaried employees earning less than $43,888

The pool of managers entitled to time-and-a-half pay will jump again on Jan. 1, then increase every three years.
The regulatory changes are expected to give overtime eligibility to millions of more salaried workers. | Photo: Shutterstock

Salaried restaurant managers earning less than $43,888 annually will be entitled to overtime pay starting July 1 under a major regulatory change announced Tuesday by the Biden administration.

The threshold rises again, to $58,656, on Jan. 1. The exemption level will then be adjusted every three years in accordance with wage data collected and analyzed by the U.S. Department of Labor (DOL).

The exemption also extends solely to bona fide executive or administrative professionals and not to individuals shouldering lower-level responsibilities for a salary instead of hourly wages. That so-called duties test does not apply to employees paid an annual salary of at least $151,164, since it’s assumed individuals would only be compensated at that level for administrative or managerial-type duties.

Currently, salaried managers are not entitled to time-and-a-half pay for hours exceeding 40 per week if they earn an annual salary of at least $35,568.

“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” Julie Su, acting secretary of DOL, said via a statement. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable.

The issue is of pertinence to the restaurant business, where general managers and other salaried unit-level employees are often called upon to fill in for hourly workers who couldn’t make their shifts. A number have sued their employers for overtime pay, arguing that they were doing the same work as individuals who were entitled to time-and-a-half wages.

The updated guidelines on duties could figure into future court challenges.

Efforts to raise the overtime exemption threshold have been underway since the Obama administration. At the time, exemptions were extended to managers earning more than $23,660. President Obama had proposed extending overtime pay to any salaried employee earning less than $50,400 annually.

The trigger was reset instead to the current threshold of $35,568.

The new overtime rules are detailed in a 383-page document issued by DOL. Beltway insiders were still digesting the contents as of this posting.

DOL said it received 33,000 comments from the public on the overtime changes it was eyeing, an extraordinarily high number.

The new standards were not well received by industry groups.

“This rule will exponentially increase operating costs for small business restaurant owners who are trying desperately to maintain menu prices for their customers," Sean Kennedy, EVP of public affairs for the National Restaurant Association, said in a statement. "And because DOL created a one-size-fits all rule based on national income data, rather than regional data, this change is going to disproportionately impact restaurant owners in the South and Midwest."

The International Franchise Association similarly expressed its dismay. 

“This rule is the latest unnecessary and burdensome regulation from the Biden administration targeting small businesses,” Michael Layman, the group's SVP of government relations and public affairs, said in a statement. “It comes as many entrepreneurs continue to struggle in today’s unpredictable regulatory climate, grappling with lingering inflation, labor challenges, and high costs of goods.”

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