The National Restaurant Association is against the rule because of what it would do to operating costs for the average small business.
The U.S. Department of Labor on Wednesday proposed a new rule that would make 3.6 million more U.S. employees eligible for overtime pay.
Currently, employers are required to pay overtime to executive, administrative, and professional full-time salaried workers making less than $35,568. But the Biden Administration wants to increase the threshold to $55,068, giving millions more people overtime pay eligibility. As part of the potential new rule, the salary threshold would be updated every three years to reflect current earnings data.
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.
“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 Economic Policy Institute, which leans toward liberal ideals, told the AP that about 15 percent of salaried workers are eligible for overtime pay under the current rule. The new mandate would double 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.
The change would impact 180,000 employees in the leisure and hospitality sector, according to the Department of Labor. The National Restaurant Association criticized the proposed rule, noting that it would increase operating costs by an estimated 2.5 percent. The Association added that this shift would be a significant burden for small business restaurants that 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.
Michael Layman, the International Franchise Association's senior vice president of government relations and public affairs, said the ruling "comes at the wrong time" for businesses still reeling from the pandemic's impact.
“Franchised businesses already pay higher wages and offer better benefits than their non-franchised counterparts on average, and we look forward to sharing our members’ perspectives on this new, unnecessary regulation," Layman said in a statement.
The significant jump in the threshold revives a move attempted under the Obama administration. In 2016, the Department of Labor wanted to more than double the threshold from $23,660 to $47,476, which would've made more than 4 million workers eligible for overtime pay. The move was successfully shut down by a Republican-led lawsuit. Later in 2019, Trump's administration raised it to $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.”