Workforce

Restaurant coalition sues to block broadened eligibility for overtime pay from taking effect July 1

Restaurant trade groups and other business organizations have filed the action in the same court that struck down a similar change in the rules in 2017.
More salaried restaurant employees would qualify for overtime pay if DOL's rules take effect. | Photo: Shutterstock

A coalition of restaurant advocacy groups and other trade associations have filed a lawsuit that seeks to kill the U.S. Department of Labor’s broadened rules on overtime eligibility before the regulations take effect July 1.

Starting that day, restaurants and other employers would be obligated to pay overtime to any salaried employee earning less than $43,888 annually. For each hour exceeding 40 per week, the workers would be entitled to 1.5 times their rate of pay.

The exemption threshold jumps again on Jan. 1 to $58,656. The Department of Labor, or DOL, would have the authority to adjust that trigger point every three years thereafter.

Currently, salaried workers are only eligible for overtime pay if they earn less than $35,568 in a year. All others are due no extra compensation on top of their salaries.

Millions of workers are expected to see an increase in income as a result of the threshold for overtime eligibility being raised by 65%.

The lawsuit filed in a U.S. District Court on Wednesday contends that rules similar to the ones decreed in April were “permanently enjoined” by the same federal court in 2017 because the exemption threshold set at the time was adjudged to be too radical. The Obama administration had sought to more than double the level, from $23,660 to $47,476.

The court ruled at the time that the increase would make the nature of a salaried employee’s responsibilities irrelevant. The new threshold was so high, according to the court, that bona fide executives, administrators or professionals—the very people Congress expressly intended to exempt from overtime pay—might fall below the earnings line.

The new lawsuit resurrects that argument. Quoting from the court’s earlier decision, the action contends the new exemption level would “make salary rather than an employee’s duties determinative of whether a ‘bona fide executive, administrative, or professional capacity employee’ should be exempt from overtime pay.” As a result, it contends, 4 million employees who should be exempt from overtime pay would be eligible to collect it.

Basing a salaried workers’ eligibility for overtime on the nature of their work is known as the duties test. Ironically, the industry has opposed the duties test in the past because there’s no definitive list of responsibilities that designate a job as an executive, administrative or professional position. The grayness has prompted restaurant managers to sue for overtime pay because their duties sometimes extend to the same functions performed by their subordinates.

In 2017, the current lawsuit continues, the court also ruled that DOL hadn’t been given the authority by Congress to reset the exemption level every three years.

The action asks the court to vacate DOL’s new standards. Because the rules take effect July 1, the plaintiffs urge the court to expedite its decision on the complaint.

Those plaintiffs include the Restaurant Law Center, the legal arm of the National Restaurant Association; the Texas Restaurant Association; the International Franchise Association; the American Hotel & Lodging Association; the National Association of Convenience Stores, or NACS; and eight other trade or business groups.

The suit was filed in the U.S. District Court for the Eastern District of Texas, Sherman Division.

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