Department of Labor proposes new overtime-pay exemption threshold of $35,308

As expected, the U.S. Department of Labor has proposed that all salaried foodservice managers be entitled to overtime pay for hours that exceed 40 per week if they earn less than $35,308 a year or $667 weekly, a 49% increase from the current threshold.

The measure is expected to cost the foodservice industry tens if not hundreds of millions in additional overtime pay and prompt some operators to turn supervisory positions into hourly jobs. 

The new threshold would take effect Jan. 1.

Despite its anticipated impact, the new trigger exempting salaried employees from time-and-a-half pay will still be less of a blow to employers than the $47,476 threshold that had been proposed by the Obama administration. Adoption of that standard was halted by the U.S. District Court for Eastern Texas in November 2016, and a federal appeals court affirmed the stay about a year later. 

Since then, the Department of Labor (DOL) has enforced the old standard, set in 2004, while collecting comments about how much the trigger level should be raised. 

“At my confirmation hearings, I committed to an update of the 2004 overtime threshold, and today’s proposal would bring common sense, consistency and higher wages to working Americans,” said DOL Secretary Alexander Acosta. 

The proposal does not call for a so-called duties test, or basing a salaried employee’s entitlement to overtime pay on the nature of the work they do. Under that arrangement, restaurant managers could have been entitled to overtime pay regardless of their compensation for work that was not managerial or administrative in nature. Duties tests have been opposed by the restaurant industry because of the complications they would pose in record-keeping and classifying duties within a typical establishment. 

Nor does the proposal call for adjusting the figure in the future to reflect increases in the cost of living, as some had suggested. 

"The Department of Labor’s revisions to the rule reflect a thoughtful review process including a Request For Information and a nationwide series of listening sessions allowing the regulated community and  stakeholders to offer input on this important federal regulation," Shannon Meade, VP of public policy and legal advocacy for the National Restaurant Association, said in a statement. "The National Restaurant Association supports the Department’s common sense approach to salary increases and the absence of a provision for automatic adjustments.  We are continuing to review the proposed rule and will provide a more in-depth analysis in the days to come.”  

A similar assessment was offered by the International Franchise Association. Said Matt Haller, SVP of government relations and public policy: “The IFA commends the Department of Labor for issuing a sensible approach to expand overtime eligibility. This move gives business owners across the country the clarity and certainty needed to plan for their future, and many employees more money in their pocketbook. We look forward to supporting DOL to see that this rule moves forward as swiftly as possible.”

DOL will accept public comments on its proposal for 60 days before issuing a final new rule.