December 1, 2016, marks the day that the final version of the U.S. Department of Labor Overtime Rule takes effect. The new law raises the white collar overtime exemption threshold for salaried employees under the Fair Labor Standards Act (FLSA) to $913 per week, or $47,476 annually, from $455 per week, or $23,600 annually. Workers whose salary falls at or under the threshold can collect overtime pay.
Restaurant owners need to understand the overtime rule and how it will impact their businesses.
Who is covered by the FLSA?
Restaurant employees who work for businesses with a gross sales volume of $500,000 or more are covered by FLSA and hence, by the overtime rule.
Who is entitled to minimum wage and overtime pay under FLSA?
Most employees covered by the FLSA must be paid at least a federally-mandated minimum wage that currently stands at $7.25 per hour. Whenever these individuals work more than 40 hours in a single work week, they must also receive time-and-a-half their regular rate of pay for each hour on the job. Employers that require or allow employees to work overtime must compensate them for overtime work.
FLSA exempts, however, certain types of employees from overtime requirements. These include bona fide executive, administrative, and professional employees who qualify for “white collar” exemptions from the overtime rule based on the salary threshold mentioned above.
How is overtime pay determined?
Unless an exemption applies to their job classification, employees must receive overtime pay for all hours worked over 40 in a single workweek.
Won’t this rule be difficult for me, since I have to track my employees’ hours more closely?
No. Most restaurant owners have systems and policies in place for keeping tabs on hours worked by employees who are eligible for overtime pay. For example, you have a time and attendance system, perhaps integrated with your POS system. Under the final overtime rule, you aren’t obligated to introduce additional systems to track hours worked by employees who have just become eligible for overtime pay in keeping with the higher exemption threshold. You simply need a way to keep complete and accurate records that indicate number of hours worked daily by eligible employees.
For employees who follow fixed schedules, you may set a default schedule that reflects daily and weekly hours worked, indicating in your records that employees followed these schedules and recording changes when deviations from the schedule occur. For your employees with flexible hours, however, you must keep records of the number of hours worked. Again, following these requirements and the overtime rule should not be difficult with the time and attendance system you have in place.
Failing to comply with the overtime rule can lead to audits by the Department of Labor, as well as financial repercussions. Make sure you understand the new rule and your wage practices are in order to comply with the new law.