The U.S. Department of Labor has issued a final rule under the Fair Labor Standards Act (FLSA) that will expand overtime pay. This is the largest increase to the salary threshold eligible for overtime since 2004.
Effective January 1, 2020, the new overtime rule will implement a substantial increase to the FLSA’s previous salary level of $455 per week or $23,660 annually. Employers will only be exempt from paying overtime to employees who meet all three of the following criteria:
- Paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed
- Compensated a minimum salary of $684 per week or $35,568 annually
- Perform job duties that primarily involve executive, administrative, or professional responsibilities
Business owners with restaurants, hotels, food distribution or retail pay a vast majority of their workforce an hourly wage, which typically always includes overtime. The new overtime rule will require employers to pay overtime to employees who are considered to be at the managerial level and may have previously been exempt from overtime. This includes restaurant managers or assistant managers, hotel department managers or assistant department managers, and professionals that would be considered managers or assistant managers for food distributors or other retail businesses.
How will the new overtime rule impact your hospitality company’s bottom-line? How will the management of your labor force change? Aronson will continue to monitor and provide updates on the development of the Department of Labor’s new overtime law.
Our tax specialists are available for consultation on this matter and other business management topics for restaurants, hotels, food distributors or retail owners. Please contact Aaron Boker or one of our hospitality tax advisors at 301.231.6200 for more information.