Proposed Non-Exempt Overtime Rules to Affect Restaurant Industry

During our recent Restaurant CFO Roundtable held May 4 in Solon, Ohio, labor attorneys Seth Briskin of Meyers, Roman, Friedberg & Lewis and Susan Rodgers of Buckingham, Doolittle & Burroughs, discussed the Department of Labor’s (DOL) proposed new overtime rules for non-exempt employees, otherwise known as “white collar” exemptions. The changes are set to substantially affect how restaurant companies compensate salaried employees, increasing the minimum salary necessary for a worker to be classified as exempt from minimum wage, overtime and record-keeping regulations.  

The DOL proposes to raise the minimum salary level from $455 per week (the equivalent of $23,600 per year) to about $970 per week ($50,440 per year) in 2016. However, during the roundtable, there was some speculation that the DOL will cap the threshold at $47,000.

If a restaurant pays an employee in excess of the compensation threshold, that employee would pass the first test to be treated as exempt from overtime rules. However, that employee’s job responsibilities must be reviewed to confirm his or her exempt status. For example, an employee whose primary responsibility is not management, even though he or she is paid more than the salary threshold, would be non-exempt and therefore subject to overtime rules.

Briskin and Rodgers advised restaurants to be proactive in understanding and addressing the pending rule changes. Their suggested steps included:
  • Identifying exempt salaried employees who may be affected as soon as possible. To do this, the restaurant should determine which of its employees has a salary of less than $47,000 per year, and which make more than $122,148 annually.
  • Reviewing and analyzing jobs and job descriptions, and evaluating whether those jobs fit within an exemption.
  • Analyzing each impacted position to determine the best way to proceed after the regulations become effective.
An employer could convert salaried exempt employees to non-exempt hourly employees and pay them overtime. However, the employer should take care to develop a clear communication plan to help the employee understand why the change has been made and how he or she will be required to track hours. The employer will also need to determine whether such a conversion impacts employee benefits. For example, vacation benefits may be calculated differently for salaried exempt versus hourly employees.

If a converted employee works overtime regularly, the restaurant should evaluate ways to limit the hours worked beyond 40 per week. For example, the restaurant could consider hiring more employees to do his or her job or perform portions of the job. Alternatively, the restaurant could anticipate, budget for and pay the overtime wages.

In Fall 2015, the DOL announced that the final rules governing white collar exemptions would publish in July 2016. This past March, the DOL sent its final rule revising the white collar exemptions to the White House Office of Management and Budget. This is the last step in the regulation process before publication; however, as of now, the effective date remains unknown.

Regardless of the implementation timeline, restaurant operators should begin to lay the groundwork now for if, when and how they will need to adjust their employment practices to manage any potential new costs and ensure compliance with the new rules.

For more information about restaurant compensation trends and key takeaways from our recent Restaurant CFO Roundtable, contact Adam Berebitsky at [email protected].   

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