Restaurant advocates are concerned about spiking operating costs amid tough economic times.

The Department of Labor issued a final rule Tuesday that will expand overtime protections for millions of workers.

Currently, employers are required to pay overtime to executive, administrative, and professional full-time salaried workers making less than $35,568. Effective July 1, the threshold will jump to $43,888. By January 1, 2025, it will bump even higher to $58,656. Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels, the federal government said.

“This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time,” acting labor secretary Julie Su said in a statement. “Too often, lower-paid salaried workers are doing the same job as their hourly counterparts but are spending more time away from their families for no additional pay. That is unacceptable. The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity.”

The National Restaurant Association vehemently opposes the rule, stating that it will “exponentially increase operating costs.” The group also noted that because the Department of Labor created a one-size-fits-all rule based on national income data, instead of regional data, the shift will disproportionately impact operators in the South and Midwest.

The notable increase in the threshold renews an effort previously made during the Obama administration. Back in 2016, the Department of Labor aimed to nearly double the threshold from $23,660 to $47,476, potentially granting overtime pay eligibility to over 4 million workers. However, this initiative was thwarted by a lawsuit led by Republicans. Subsequently, in 2019, the Trump administration raised it to $35,568.

“The Association and Restaurant Law Center pushed back on a significant increase following so soon after an increase just four years ago,” Sean Kennedy, the Association’s executive vice president of public affairs, said in a statement. “Business conditions have changed significantly for restaurant operators in that time. It’s unfortunate that DOL did not heed our concerns, especially as it relates to regional discrepancies and the burden of automatic increases every three years.”

The International Franchise Association, which is also against the new rule, cited an Oxford Economics study that found franchises pay higher wages and offer better benefits than non-franchised entities on average. However, the organization noted that franchisee flexibility to reward and promote employees will be limited by the updated overtime rule.

“This rule is the latest unnecessary and burdensome regulation from the Biden Administration targeting small businesses,” Michael Layman, IFA senior vice president of government relations and public affairs, said in a statement. “It comes as many entrepreneurs continue to struggle in today’s unpredictable regulatory climate, grappling with lingering inflation, labor challenges, and high costs of goods. Small business owners, especially franchisees, need certainty to operate, and this Administration has provided them anything but predictability.”

The Department of Labor said it conducted extensive discussions with employers, workers, unions, and other stakeholders before issuing its proposed rule in September 2023, and considered more than 33,000 comments in developing its final rule.

The updated rule defines who is a bona fide executive, administrative, and professional employee exempt from the Fair Labor Standards Act’s overtime protections. Beforehand, workers were automatically exempt from overtime protections if they earned a salary of more than $107,432. That threshold will raise to $132,964 by July 1, 2024, and to $151,164 by January 1, 2025.

Wage and hour administrator Jessica Looman said that by enacting the rule, the Department of Labor is ensuring lower-paid salaried workers receive “their hard-earned pay or get much-deserved time back with their families.” She described the law as clear and predictable and promised that it would provide economic security to millions. The Department of Labor said the ruling would transfer $1.3 billion in income from employers to employees, driven by new overtime premiums and salary increases to keep certain workers from being eligible. 

The Economic Policy Institute, which leans toward liberal ideals, told the AP in August that about 15 percent of salaried workers at the time were eligible for overtime pay under the previous rule. The new mandate doubles that to nearly 30 percent. That’s still well below the 1970s when more than 60 percent of salaried employees had access to overtime pay. 

Feature, Labor & Employees