Restaurant operators may soon have a choice to make when it comes to salaried employees: pay them more, or pay them overtime wages instead.
The U.S. Department of Labor said the rule would equate to 3.6 million more U.S. employees being eligible for overtime pay. It further estimated that the ruling would transfer $1.3 billion in income from employers to employees.
“For over 80 years, a cornerstone of workers’ rights in this country is the right to a 40-hour workweek, the promise that you get to go home after 40 hours or you get higher pay for each extra hour that you spend laboring away from your loved ones,” acting Labor Secretary Julie Su said in a statement. “I’ve heard from workers again and again about working long hours, for no extra pay, all while earning low salaries that don’t come anywhere close to compensating them for their sacrifices. Today, the Biden-Harris administration is proposing a rule that would help restore workers’ economic security by giving millions more salaried workers the right to overtime protections if they earn less than $55,000 a year. Workers deserve to continue to share in the economic prosperity of Bidenomics.”
The National Restaurant Association issued a press release criticizing the rule, claiming it would be an unfair burden to place on restaurant businesses. The organization estimated that the proposed move would increase operating costs by 2.5%, adding that small business restaurants average a 3–5 percent pre-tax margin.
“Adding this kind of cost to the already high price of food and years of increasing labor costs will leave many of these operators in the untenable position of raising prices, cutting costs or closing their doors,” Sean Kennedy, executive vice president of public affairs for the Association, said in a statement.
In 2016, the Obama Administration attempted to raise the salary threshold from $23,660 to $47,476, which would have made 4 million workers eligible for overtime pay. Republicans led the charge to successfully kill the proposal. In 2019, the Trump Administration raised the salary threshold up to the status quo, $35,568.
The Department of Labor said the decision followed 27 listening sessions and more than 2,000 participants. The proposal will be open to public comment for 60 days.
“We are committed to ensuring that all workers are paid fairly for their hard work,” Jessica Looman, principal deputy wage and hour division administrator, said in a statement. “For too long, many low-paid salaried workers have been denied overtime pay, even though they often work long hours and perform much of the same work as their hourly counterparts. This proposed rule would ensure that more workers receive extra pay when they work long hours. Public input is essential as we consider the needs of today’s workforce and industry demands, and we encourage continued stakeholder input during the public comment period.”