August 22, 2023

On Watch: Major decisions on labor policies coming soon

What to expect from the two final rules and proposed overtime changes
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The Joint Employer Final Rule
The National Labor Relations Board (NRLB) is expected to finalize a new definition of what constitutes a “joint employer.” The anticipated final rule is expected to change the existing standard for when two businesses can be considered joint employers and thus be liable for one another's labor practices. The Association and the Restaurant Law Center opposed NRLB’s decision to replace the “direct and immediate” joint employer standard approved in 2020, which provided a clear, workable guidance for foodservice employers and employees. This new standard will create unnecessary challenges for restaurant operators who are trying to understand what qualifies as joint employer status.

The new rule is expected to be vague and adopt broader circumstances in which a company can be considered a joint employer, increasing an employers’ legal liability. The final rule is expected to make a restaurant operator jointly liable for labor or employment violations committed by an entity with which they have a business relationship. This would apply to franchisors and franchisees, as well as any operator that contracts with another company for on-site work, such as janitorial services. This final rule will be effective immediately.

The National Restaurant Association and the Restaurant Law Center will explore every avenue to challenge the final rule, while also providing members with educational resources.

The Independent Contractor Final Rule
The U.S. Department of Labor (DOL) is expected to issue a final rule changing the classification of employees and independent contractors under the Fair Labor Standards Act (FLSA). This new regulation would complicate the criteria employers need to consider when determining how to classify a worker. Previously, employee classification was determined by two factors. The new final rule is expected ask employers to consider six nuanced factors, creating uncertainty for employers and employees alike. This anticipated final rule will add unnecessary complexity to the classification process and make it difficult for operators to determine classification status without legal counsel, which can be very expensive. This anticipated rule may have a secondary impact on restaurants that contract with third-party delivery companies.

The Overtime Proposed Rule
DOL is also expected to release for public comment a new rule that would upend overtime pay regulations, impacting salaried employees in restaurants across the country. We have not yet seen the proposed rule, but from our conversations with labor experts, we anticipate the proposed rule could raise the income threshold for overtime eligibility to $72K/year. Currently, the income threshold is $36K/year. If DOL raises the threshold, it would dramatically increase workforce costs for restaurant operators.

The Association is already working on comments to submit to the DOL to convey how this change would harm restaurant operators big and small. Additionally, the Association will continue to educate and advocate with DOL throughout the rulemaking process.

These anticipated regulatory actions will impact how restaurants operate and build their workforce. The Association has previously taken several actions on these issues, including submitting public comments, meeting with federal agency officials, and supporting legislative oversight, and it will continue to consider all avenues to challenge harmful DOL final rules and participate vigorously in the public comment process for proposed rules.