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FLSA Overtime Rules on the Table: How Restaurants Can Cope with Costs

If it feels like the labor cards are stacked against you right now, you’re not alone. There is a LOT going on the labor front. Wage increase, new overtime rules, a changing workforce, no tipping policies. This isn’t the first time we’ve talked about it on this blog, but the further we get into 2016, […]

If it feels like the labor cards are stacked against you right now, you’re not alone. There is a LOT going on the labor front. Wage increase, new overtime rules, a changing workforce, no tipping policies. This isn’t the first time we’ve talked about it on this blog, but the further we get into 2016, the more we sense that the water cooler conversations about the inevitable increase in labor costs for the industry is reaching a boiling point.

Last week, we reported on California’s approval of new $15 minimum wage , an increase from their current $10. As you might have guessed, New York is not far behind.

While the east and west coasts are coping with the approvals (or pending approvals) there’s also this other tiny little regulation on the table that, if passed, will impact overtime pay for salaried workers.

At the beginning of April, the Department of Labor submitted its pay changes to the Fair Labor Standards Act Overtime Rules . The move signaled a big leap in the effort to alter the regulations that began back In March of 2014 when President Obama asked Secretary of Labor Tom Perez to investigate the current overtime rules.

The most significant piece of the proposed law is the salary threshold for overtime eligibility – which would more than double to $970 a week. Under the proposed changes, employees earning an annual salary of $54,440 or less would be eligible for overtime pay.

Currently, the threshold sits at $455 a week which means salaried workers who make $23,660 or more are not automatically eligible for overtime pay. The threshold was last updated in 2004. The Obama administration says that since then, the threshold has been eroded because of economic variables such as inflation. A salaried employee earning $23,660 a year is technically below the poverty line which for a family of four was $24,008 in 2015.

Hourly workers in the United States are automatically eligible for overtime pay. This used to be the case for salaried employees, but that has changed over the years.

Today’s standards have several stipulations that are based on (1) their classification and (2) a “duties test” which assesses whether or not an employee earning an annual salary higher than $23,660 performs administrative or executive type work. If the results of the test indicate that the salaried worker does mostly administrative and executive work then they are not entitled to overtime pay.

The Obama administration is pointing to this “white collar exemption” as an example of the problem with the current overtime rules.


The National Restaurant Association

The National Restaurant Association came out in defense of restaurant owners and operators who are concerned that their profit margins and ability to keep employing people are at risk.

“The Department of Labor’s proposed rules would radically change industry standards and negatively impact employees,” said Angelo Amador, Senior Vice President and Regulatory Counsel for the National Restaurant Association. “Supporters say they want to increase Americans’ take-home pay, but these questionable changes would limit employment and advancement opportunities in the restaurant industry and beyond.”

International Franchise Association

IFA President/CEO Robert Cresanti mirrored those sentiments.

“The proposed changes will reduce opportunity and flexibility for millions of employees. These rules are severe enough to warrant additional analysis by the DOL and we encourage Congress to delay the final rule until further notice.”


Here’s the deal. Overtime is inevitable. It would be darn near impossible to completely eliminate it. But that doesn’t mean it should run rampant in your restaurant either.

Overtime should be predictable and controllable. Operators should feel confident that they’ve scheduled the right amount of people for the volume of the day and that those people won’t go into overtime or excessive overtime.

Online employee scheduling, forecasting and communication solutions can help operators optimize their labor and control overtime in several ways:

Overtime Data

Overtime data in the schedule helps managers spot team members in danger of going into overtime and making a decision about their hours before the schedule is sent out.

Overtime Alerts

Managers can get daily Overtime Alerts to see which employees have reached overtime.

Overtime Reports

Overtime Reports are an absolute wealth of information. Seriously, the money you can save by adding this report to your daily routine could cut overtime by hundreds of hours a month and save you up to 2% on your labor costs.

Employee overtime reports in the scheduler let you view:

    1. n

    2. Employees that are scheduled with overtime


    1. Overtime costs for each day and the entire week


    1. Overtime hours for each day and the entire week


The HotSchedules Employee Overtime Report, for instance, lists every employee on this schedule who is projected to hit overtime, on what days they are projected to hit overtime, and how much this overtime labor is projected to cost.


The decision over the FLSA’s overtime regulation is expected to be decided in July 2016. Meanwhile, another piece of legislation called the Protecting Workplace Advancement and Opportunity Act was introduced by both branches of Congress to stop the DOL’s final rule on exemptions. It was recently submitted to the White House’s Office of Management and Budget for review. The goal of the bill is to have the DOL conduct research to understand the implications of the new overtime threshold on small businesses, non-profits, and public employers before it goes into effect.

It remains to be seen whether or not either of these pieces of legislation will pass, though there’s confidence that the DOL’s new regulations will be approved.

Restaurants that want to get ahead of the increase should start creating a plan to track each team member’s status as well as their time and attendance. Tracking time and attendance or the actual hours worked will be crucial for two reasons. For one thing, it will make sure salaried employees are properly compensated under the new rules. Having an accurate audit of hours and payroll information could also come in handy if a class action lawsuit is brought against the employer.

This is really the tip of the iceberg when it comes to the overtime topic. Stay tuned for more from us as we watch the news unfold.

See how easy it is to track your team’s time and attendance with our eBook:

Is Online Employee SchedulingnRight for Your Restaurant?

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