Restaurant operators should plan to comply with anticipated changes to overtime regulations scheduled to go into effect in December, despite a legal challenge that could put the new rules on hold, labor attorneys said Wednesday.
The U.S. Department of Labor was sued in federal court on Tuesday by a collection of 21 states attempting to overturn the new rules. Later in the day, a coalition of business trade groups, led by the U.S. Chamber of Commerce, also filed a similar lawsuit in the same federal court, in Sherman, Texas.
Both complaints challenge the labor department’s authority to impose automatic increases to the salary threshold for overtime exemption, saying it sidesteps the required rules-making process and ignores the impact of economic conditions.
In addition, Rep. Tim Walberg, R-Mich., also introduced legislation on Wednesday seeking a six-month delay in implementation of the new rule, saying it would disrupt the lives of students, small business owners and workers trying to climb the ladder of opportunity. Walberg has attempted legislation to rewrite the rule earlier this year, but Wednesday’s proposed bill, called the Regulatory Relief for Small Business, Schools and Nonprofits Act, seeks more time for businesses to comply. The bill has the support of the National Restaurant Association.
U.S. Labor Secretary Thomas Perez vowed to vigorously defend the overtime regulations change in a statement late Tuesday, saying the department is confident in the legality of all aspects of the final rule, and that it was the result of a comprehensive and inclusive rules-making process.
“Despite the sound legal and policy footing on which the rule is constructed, the same interests that have stood in the way of middle-class Americans getting paid when they work extra are continuing their obstructionist tactics,” Perez said. “Partisan lawsuits filed by 21 states and the U.S. Chamber of Commerce seek to prevent the Obama administration from making sure a long day’s work is rewarded with fair pay.”
Under the new rules, salaried workers earning less than $47,476 annually will be eligible for overtime pay, double the current threshold of $23,660. As a result, an estimated 4.2 million more workers across the U.S. are expected to become nonexempt and therefore eligible for overtime pay.
Perez contended that the new rules restore the intent of the Fair Labor Standards Act, which, as the “crown jewel of worker protections,” has lost its luster in recent years.
In 1975, for example, an estimated 62 percent of full-time salaried workers had overtime protections based on pay, he said. Today, only 7 percent have those protections.
Randy Johnson, senior vice president of labor, immigration and employee benefits for the U.S. Chamber, meanwhile, said in a statement the new salary threshold will significantly increase labor costs for businesses.
Because of the automatic escalator provision that will change the salary threshold every three years, Johnson predicted more salaried professionals will be converted to an hourly wage, and workplace flexibility will be reduced, along with remote access to work and opportunities for career advancement.
Attorney Alden Parker, regional managing partner for law firm Fisher Phillips in Sacramento, Calif., agreed that many restaurant operators will likely decide to convert salaried workers to hourly as a result of the new regulations.
Parker warned that a focus on the salary threshold is only one side of the equation.
Assistant restaurant managers or general managers at salaries just above the threshold who spend at least half of their work hours on nonsupervisory duties could also fall into the nonexempt category under the new rules.
“I’m looking at this as an opportunity for restaurateurs to scrutinize their positions,” he said.
Attorney Todd Aidman, meanwhile, chair of the restaurant practice group for law firm Ford Harrison LLP in Tampa, Fla., is advising restaurant operator clients to plan to comply with the new overtime rules by Dec. 1.
While the District Court judge hearing the legal challenge could call for a temporary restraining order to delay implementation until the merits of the case can be decided, any potential restraining order could also be challenged in court, Aidman said.
Update: Sept. 21, 2016 This story has been updated to include information about a proposed delay of the rule and additional source.