Upping the Overtime Costs
Restaurants operate on a well-known small margin-of-profit, so any changes that may impact their bottom lines can truly make or break a company. Recently, restaurant owners have had to analyze the impacts of a minimum wage hike, but now a new regulation threatens to further drive a wedge between employer and employee, with employees taking the brunt of the negatives that come with the change. The threshold for employers being required to pay overtime currently stands at $23,660, or $455 a week. With new regulations, that threshold would increase to $50,440, or $970 a week. While this may seem like good news for employers, the fact of the matter is that what’s really at risk is the happiness and upward mobility that’s available for hourly employees.
Employees in the restaurant industry typically thrive on flexible hours with opportunities for acquiring overtime, but the new regulations that threaten to increase the overtime threshold would reduce the opportunity for employees to qualify as exempt salaried workers and would lead to less flexibility, fewer management opportunities for employees, greater litigation, and no guarantee of higher income. The result is a cleaving of hourly and salaried workers larger than what’s currently present.
Consider this: More than 80 percent of restaurant owners and 97 percent of restaurant managers start their careers in non-managerial positions, and many of those entry-level positions included dishwasher, bussers, desk clerks, and hosts. While fewer than a million workers might see some benefit under these new regulations, the fact of the matter is that 3.5 million workers will be demoted from salaried positions — paid regardless of how many hours they work with salaried employee benefits, to an hourly employee status paid only for hours worked and less benefits. This isn't just a hit on employee paychecks; it's a blow to the career opportunity path that they would otherwise have.
Small businesses are already revealing some of these potential drawbacks and are requesting that the regulation be revisited before being put into use. Only time will tell whether or not these proposed changes will actually go into effect.
E Friedman Associates Inc