The restaurant industry is concerned that the federal Department of Labor’s (DOL) proposed changes to the overtime rule will derail opportunities for hourly employees seeking managerial careers and significantly ratchet up compliance costs.
Louisiana restaurateur Octavio Mantilla testified on behalf of the National Restaurant Association (NRA) at a U.S. Senate Small Business Committee hearing last week about the impact of the Obama Administration’s proposed changes to federal overtime regulations.
Under the DOL’s proposed changes, employees earning less than $50,440 a year would be entitled to overtime pay for any work exceeding a 40-hour workweek, up from the current $23,660 threshold. The DOL proposal also calls for automatically increasing the wage threshold in future years.
The changes would make nearly 5 million currently exempt workers eligible for overtime pay.
Mantilla told committee members that more than doubling the pay threshold for exempt status would end up forcing employers to reclassify many exempt employees as nonexempt and return them to hourly status. The change would have a negative effect on scheduling flexibility, bonuses and benefits, he predicted.
“The proposed threshold increase would be too large for us to absorb,” Mantilla said. He said many managers “would end up being moved back to an hourly rate, which I can assure you they would all view as a demotion.”
Mantilla noted that employees who lose their exempt status also would miss out on an important advantage he had: the flexible work schedule as a salaried, exempt manager that allowed him to complete his college and post-graduate degrees. Hourly employees seeking salaried, entry-level management positions could lose out on many of those managerial opportunities if the rule forces more managers into hourly positions.
“When I was an hourly employee, I wanted to be salaried,” he said. “It gave me the flexibility to attend college, further my education and eventually become an entrepreneur and own my own restaurants,” he said.
The DOL’s proposal also raised the possibility of resurrecting a lengthy duties test to determine if salaried managers are exempt from overtime.
Among other suggestions, the DOL said it was considering a percentage limitation on the nonexempt work a manager could perform.
Mantilla said adding a “long duties test” would place significant administrative burdens on employers, increase labor costs, cause customer service to suffer and increase wage-and-hour litigation.