National Restaurant Association and Restaurant Law Center Push Back on Proposed Overtime Rule

Washington, D.C. – Today, the National Restaurant Association and the Restaurant Law Center (RLC) filed comments with the Department of Labor calling for them to withdraw the recently posted Notice of Proposed Rulemaking (NPRM) on increased overtime thresholds.

The joint opposition to the proposal sets out four substantive concerns:

• The proposal sets the standard minimum salary too high by using data that includes some of the highest wage jurisdictions in the country, skewing the final level, creating an unequal burden on restaurant operators and other business owners in lower-wage regions.
• The proposal uses national data to set salary levels for highly compensated employees too high. This could be corrected in part by using regional data in the final rule.
• The proposal lacks any joint employment safe harbor for restaurant franchisors who help their franchisees implement new wage-and-hour requirements, unlike previous rules and should be added.
• The proposal includes an automatic “indexing” mechanism for the salary threshold, which we strongly oppose because the DOL does not have the authority to include the provision in the final rule.

“This rule is meant to draw a line separating exempt from non-exempt employees, however, by setting the salary threshold inordinately high for the foodservice industry, the Proposed Rule essentially eliminates the duties test meant to evaluate exempt status,” said Angelo I. Amador, executive director of the Restaurant Law Center. “This means operators will have to re-classify at least some of their supervisory positions that would pass the duties test to the non-exempt, non-salary ranks. In some parts of the country, solely based on the proposed rule using national income data rather than regional data, one hundred percent of supervisory employees in our industry that would pass the duties test would fall below the Department’s proposed salary level.”

Employees often view reclassification to non-expect status as a demotion or punishment, particularly where other employees within the same restaurant continue to be exempt. Most employees view their exempt status as a symbol of their success within the company. To additionally compensate that success, salaried exempt employees enjoy significant benefits in their employment, ranging from flexibility, paid vacation, paid holidays, retirement savings plan, and health insurance, which would all be at stake should they be forcibly reclassified.

“The restaurant industry is dominated by thousands of small businesses, each facing unique economic conditions and challenges in its local community,” said Jordan Heiliczer, director of labor and workforce policy at the National Restaurant Association. “This rule creates an exemption that will only benefit employees and employers in certain regions of the country. Restaurant operators in the South and Midwest regions will be at a competitive disadvantage and employers in urban areas or with high profits will be able to maintain exempt employees at a rate that far exceeds rural areas.”

When releasing the Proposed Rule, the DOL indicated that it would increase the salary threshold to $55,068 annually, however in a footnote in the filing, the Department suggests that if a final rule is promulgated in the first quarter of 2024, the salary threshold would be set at $60,209 annually, an increase of almost seventy percent of current levels. The comments assume the Department will issue the final rule in the first quarter of 2024.

Read the full National Restaurant Association and Restaurant Law Center joint comments here.