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DOL issues final overtime rules

Salaried employees earning less than $47,476 no longer exempt from overtime

The final rule from the U.S. Department of Labor (DOL) directing which salaried employees are eligible for overtime was unveiled May 18, 2016.  Missouri Restaurant Association advised its members previously to expect release of the rule earlier than previously indicated, possibly by May 16.

The rule becomes official when published in the Federal Register, which is projected to be on Monday, May 23, 2016, and becomes effective on December 1, 2016.  Vice President Joe Biden, DOL Secretary Thomas Perez and Senator Sherrod Brown (D – Ohio) unveiled the rule in a ceremony in Columbus, Ohio.

The final rule is 508 pages long; however, the Administration did provide a 3-page overview. The matter can be further condensed to four bullet points.

The DOL Final Rule on Overtime:

  • Guarantees time-and-half pay to any salaried employee earning under $47,476 a year ($913 a week) and who works more than 40 hours in a week.
  • Automatically updates the salary threshold every three years, tying it to the 40th percentile of full-time salaried workers in the lowest-income Census region (currently the South).  The first update would be Jan. 1, 2020.  Furthermore, the DOL projects a salary threshold of $51,000 by January 1, 2020.
  • Makes no changes in the duties tests used to determine whether a salaried employee above the threshold is considered exempt from overtime pay.
  • For the first time, allows certain bonuses and incentive payments to count toward up to 10 percent of the new salary level if the payments are made on at least a quarterly basis.

Further Compliance Guidance

The Administration issued a Small Business Compliance Guide.

In addition, Alex Passantino, a Partner at the law firm of Seyfarth Shaw and former Acting Administrator of DOL’s Wage & Hour Division, and Angelo Amador, Senior Vice President & Regulatory Counsel at the National Restaurant Association, will hold a complimentary webinar on the final rule on Thursday, May 26, at 2:00 pm Central.  There is no cost to attend the webinar; however, registration is required.  You can register by clicking here.  More details on the webinar are included below.

Engagement with the National Restaurant Association

The NRA would like to thank again the thousands of you who engaged through the NRA by using its “Take Action” page, attending the Public Affairs Conference, or by other means.  The Administration highlighted that the Association submitted 2,648 comments.

Two clear examples of the industry’s influence in the rule are highlighted in the sections dealing with the “long” duties test and the bonuses. On the “long” duties test, the rule states that the “Department understands the concerns of employers and their advocates that prohibiting managers from ‘pitching-in’ could negatively affect the workplace. For example, NRA stated that ‘Performing hands-on work at the manager’s discretion to ensure that operations are successfully run in no way compromises the fact that the manager’s primary responsibility is performing exempt work.’”

As to allowing bonuses, the rule states that “Commenters representing employers offered a range of reasons for generally supporting the inclusion of nondiscretionary bonuses and incentive payments…the NRA agreed that such payments are an essential part of exempt employees’ compensation in its industry.”

We would urge you to stay involved as we take our next steps in our legislative and potential legal strategies.  In the meantime, we will continue to provide compliance guidance.

National Restaurant Association Reaction

NRA is appreciative that the DOL appeared to listen to restaurants’ concerns and did not include the burdensome “long” duties test that would have led to increased contentious disputes and litigation–something the DOL stated it wanted to avoid. However, the threshold for exempt employees in the final regulations is still too high.

Restaurants operate on thin margins with small profits per employee and little room to absorb added costs. More than doubling the current minimum salary threshold for exempt employees, while automatically increasing salary levels, will harm restaurants and the employer community at large.

More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions and move up with performance-based incentives. These regulations may mean that salaried employees, who have worked hard to get where they are, could be subject to becoming hourly employees once again.

Opposition will Continue

The DOL moved ahead with these regulations despite widespread opposition. Hundreds of lawmakers have joined with employer and nonprofit groups in criticizing DOL for failing to accurately estimate the rule’s impact. We expect immediate legislative efforts to defund, block or nullify the rule. We will also evaluate potential litigation against the DOL over its process for issuing the final rule and some of its mandates. The NRA has been a leading force in D.C. on this matter and will continue to use all available legislative and legal options to block a damaging rule.

Missouri Restaurant Association applauds the NRA for its work on this and other federal regulatory issues.  Your membership in MRA includes dual membership in the National Restaurant Association at no additional cost to you.

Author: MRA
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