National Restaurant Association Statement on DOL Changes to the Overtime Threshold

Washington, D.C. – Today, the Department of Labor (DOL) issued a final rule updating overtime regulations. The rule will significantly increase the overtime threshold to include all employees making up to $58,656 annually. The rule will take effect in two steps, with an increase in July of this year and another in January 2025. Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association issued the following statement about the change:

“This rule will exponentially increase operating costs for small business restaurant owners who are trying desperately to maintain menu prices for their customers. 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 Association and Restaurant Law Center pushed back on a significant increase following so soon after an increase just four years ago. Business conditions have changed significantly for restaurant operators in that time. It’s unfortunate that DOL did not heed our concerns, especially as it relates to regional discrepancies and the burden of automatic increases every three years.”

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

Background on the unique operating perspective of restaurants:

The typical small business restaurant runs on a 3-5% pre-tax margin. Food and labor costs are the two most significant line items for a restaurant, each accounting for approximately 33 cents of every dollar in sales. Other expenses – typically non-controllable costs like credit card swipe fees and occupancy costs – generally represent about 29% of sales. For the vast majority of restaurant operators, these three categories increased significantly in recent years.

According to analysis by the National Restaurant Association, in 2019, pre-tax income represented approximately 5% of sales for a typical restaurant. For a restaurant with annual sales of $900,000, this translated to pre-tax income of $45,000.