Restaurants may see an upswing in labor costs on Jan. 1 under new rules from the U.S. Department of Labor for determining when salaried employees are entitled to overtime pay.

Under the regulations issued this morning, restaurant managers, assistant managers, executive chefs, headquarters support personnel and other managerial staff members will qualify for time-and-a-half pay if their annual salary exceeds $35,568, compared with the current threshold of $23,660.

So-called “highly compensated employees,” a term coined to describe white-collar professionals such as lawyers and doctors, will qualify for time-and-a-half pay if their annual salaries fall below $107,432, a rise from the current level of $100,000.

Restaurants and other employers can count nondiscretionary bonuses and other performance rewards for up 10% of an individual’s compensation calculation.

The Labor Department estimates that 1.2 million Americans will see a bump in their compensation because of the new rules. The regulations they replace have been in effect since 2004.

The new rules set a 50% increase in what salaried employees need to earn to qualify for overtime pay when they clock more than 40 hours on the job. But the revised figure is considerably lower than the $47,476 trigger that had been set by the Obama administration. A district court judge blocked enactment of that standard in November 2016, right before it went into effect, because of concerns about the process that arrived at that figure.

“The IFA [International Franchise Association] commends the Department of Labor for issuing a sensible approach to expand overtime eligibility,” Matt Haller, SVP of government relations and public policy for the association, said in a statement. “This move gives business owners across the country the clarity and certainty needed to plan for their future, and gives many employees more money in their pocketbook.”

"Today's rule is a thoughtful product informed by public comment, listening sessions, and long-standing calculations," Wage and Hour Division Administrator Cheryl Stanton said in a statement. "The Wage and Hour Division now turns to help employers comply and ensure that workers will be receiving their overtime pay."

Source: Peter Romeo for Restaurant Business; September 24, 2019