DOL Overtime Final Rule: What Restaurant Operators Need to Know Ahead of July 1

DOL Overtime Final Rule: What Restaurant Operators Need to Know Ahead of July 1

The first increase in the DOL Overtime Final Rule is scheduled to take effect next week, July 1.

• The Final Rule increases the salary threshold to determine whether employees are exempt from overtime pay under the Fair Labor Standards Act (FLSA).
• Lawsuits seeking to invalidate and set aside the Final Rule will see movement this week, potentially impacting its implementation.

Overview of the Final Rule:

The Department of Labor (DOL) issued a Final Rule that includes the following provisions:

• Standard Salary Threshold Increase: Effective July 1, 2024, the standard salary threshold will increase to $844 per week ($43,888 annually). It will rise again on January 1, 2025, to $1,128 weekly ($58,656 annually).
• Highly Compensated Employee (HCE) Threshold Increase: The salary threshold for HCEs will be $132,964 annually starting July 1, 2024, and will increase to $151,164 on January 1, 2025.
• Automatic Updates: Starting July 1, 2027, the earnings thresholds will be automatically updated every three years based on wage data.

What Restaurants Should Do Now:

• Review Job Duties: Ensure employees are correctly classified as exempt or non-exempt based on their job duties. Refer to this DOL fact sheet for guidance on determining exempt status.
• Review Payroll Records: Identify salaried exempt employees with wages below the new threshold. For these employees, you might consider 1) Raising their salary above the new limit or 2) Changing their status to non-exempt and properly tracking hours to pay overtime when appropriate.
• Consult Counsel: Consult with an employment attorney licensed in your state to determine how best to comply with the Final Rule and all applicable state and local rules.

Monitor Legal Challenges:

• Current Legal Actions: Several challenges to the Final Rule have been filed. Two of the cases, one by The Restaurant Law Center (RLC), Texas Restaurant Association (TRA), and a coalition of national business groups, and another by Texas Attorney General Ken Paxton, have been assigned to United States District Court Eastern District of Texas Judge Sean Jordan. Judge Jordan has set a hearing for June 24 to consider a Temporary Restraining Order on enforcement while litigation is pending.
• Prepare for Compliance: Employers should review their salaries and classification policies to determine what is necessary to comply with the Final Rule if and when it becomes effective. This decision can be complex and should be made with the guidance of experienced counsel. Given the legal challenges, restaurants may wish to plan for the implementation of the Final Rule but hold off on taking decisive action for as long as practicable. In 2016, a similar rule was struck down only days before it was scheduled to become effective, causing many employers to adjust plans accordingly.

For More Information:

• DOL: Final Rule on Overtime Protections
• DOL: Final Rule Webinar
• DOL: Earnings Threshold Chart
• DOL: Small Business Compliance Guide
• DOL: Final Rule FAQ
• RLC/TRA: Litigation Page
• Association/RLC: Comments on Proposed Rule
• Association/RLC: Webinar on Proposed Rule

Originally published by our partners at the National Restaurant Association in their weekly newsletter.