Restaurant and Hotel Owners are Saved from Paying Out Expanded Overtime

September 6, 2017

On Thursday August 30, 2017, a U.S. District Court judge in Texas dismissed an Obama administration law that would have expanded the amount of overtime that gets paid to employees. The law was originally scheduled to go into effect on December 1, 2016; however, a federal judge in Texas froze the implementation of the new law in November 2016. Should the law have been gone into effect, business owners would have been required to pay overtime to salaried employees who earn less than $913 per week or $47,476 per year. The implementation of this law would have severely impacted both hospitality owners and employees.

The new overtime rule would have been a substantial increase to the Department of Labor’s Fair Labor Standard Act (FLSA)’s previous salary level of $455 per week or $23,660 annually. Employers would have only been exempt from paying overtime to employees who meet all three of the following criteria:

  1. Paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
  2. Compensated a minimum salary of $913 per week or $47,476 annually.
  3. Perform job duties that primarily involve executive, administrative, or professional duties.

Restaurant and hotel owners generally pay a vast majority of their workforce an hourly wage, which typically always includes overtime. The new rule would have resulted in paying overtime to the employees who are considered to be at the managerial level and are usually exempt from overtime. This would include restaurant managers and assistant managers as well as hotel department managers or assistant department managers.

While this is considered good news for restaurant and hotel owners, this is a temporary solution and the overtime rules could be revisited again in the near future. In fact, the Department of Labor is currently working on proposing a new rule that would potentially replace the current law as it stands.

How will the new overtime law impact your hotel or restaurant’s bottom-line? How will the management of your labor force change? We’re not sure what the new law will be and how it will affect restaurant and hotel owners; however, Aronson will continue to monitor and provide updates on the development of The Department of Labor’s new overtime law. Stay tuned!

Aronson LLC is available for consultation on tax and business management topics for restaurants and hotels. Please contact Aaron M. Boker, CPA at 240.364.2582 or for more information.