Joanna Fantozzi

The U.S. Department of Labor has proposed a new rule that would raise the ceiling on overtime eligibility requirements to workers earning less than $1,059 per week or about $55,000 per year, up nearly 55% from the current threshold of $35,568. This proposed rule would extend overtime provisions to 3.6 million more workers around the country, many of whom work in the hospitality industry.

“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,” acting labor secretary Julie Su said in a statement. “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 Biden-omics.” 

The proposed rule also would automatically update the salary threshold every three years “to reflect current earnings data.”

Unsurprisingly, the restaurant industry is not on board with the massive change to salary requirements, which the National Restaurant Association says could cause many small businesses to close.

Related:Labor Department issues final overtime rule

“Restaurant operators are once again feeling the weight of uncertainty because of a Department of Labor change that will increase their operating costs,” Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association said in a statement. “The average small business restaurant runs on a 3-5% margin, but DOL found that the changes proposed in this rule will increase costs for affected restaurants by 2.5% percent. 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.”

The International Franchise Association similarly feels that this rule would be too challenging for small restaurants “who continue to struggle in the post-pandemic economy with continued inflation and labor shortages, and as wages are at an all-time high.”

The law follows a similarly proposed Obama-era rule that proposed a $50,440 ceiling, before the administration settled on a $47,476 ceiling that was then blocked by a Texas federal judge before it could take effect. If this currently proposed rule under the Biden administration were to pass, it might face similar legal questions.

Related:Labor Department proposes tweaks to overtime calculation rules

Contact Joanna at [email protected]