NCCR to Labor Department: plans to expand overtime eligibility would hit chain restaurant owners harder than other businesses

WASHINGTON, 2015-9-4 — /EPR Retail News/ — The National Council of Chain Restaurants told the Labor Department today that the department’s proposal to expand overtime eligibility would hit its member companies harder than other businesses, requiring drastic changes in staffing structure, severely limiting promotion and career opportunities for would-be managers and possibly putting some restaurants out of business.

“The regulations which the department is proposing to change were modernized in 2004 to specifically recognize the unique role that supervisors in restaurants must perform and the exceptional career advancement opportunities that restaurant provide to hourly workers,” NCCR Executive Director Rob Green said. “If allowed to stand, the one-size-fits-all proposal will harm chain restaurant managers’ career advancement, eliminate key management positions, and have a negative impact on customer service and workplace morale. We need policy that encourages workplace advancement and this is a step in the wrong direction.”

Green’s comments came in a letter to DOL, which has given businesses until Friday to respond to a proposal that would make most workers earning up to $970 a week eligible for overtime, up from the current $455 set in 2004. DOL is also exploring whether managers who make more – who can currently be declared exempt from overtime if they meet tests such as having supervision of other workers as their primary duty – should face additional restrictions in order to remain exempt.

Green called the $970 figure, intended to give overtime to the lowest-paid 40 percent of workers in all industries nationwide who now receive a fixed salary, “arbitrary.” He said DOL should use the formula it used in 2004, which based the $455 figure on the lowest 20 percent of workers in the south rather than nationwide and in retail rather than in all industries.

Green said one chain with 250 restaurants estimates that 85 percent of its managers have base salaries below the $970 threshold. Another chain expects it would have to reclassify 90 percent of its managers as hourly, he said. The number also fails to recognize regional difference in cost-of-living and pay, he said.

“Given the intense competition and low profit margins under which chain restaurants operate, the increased salary level proposed will have a particularly adverse impact on restaurant operations, and in some cases will threaten their business viability, especially in low-cost and rural locations,” Green said.

Green said NCCR strongly opposes any changes in the job duties tests, along with a provision of the proposal that would automatically increase the dollar threshold each year.

NCCR is the leading trade association exclusively representing chain restaurant companies. For more than 40 years, NCCR has worked to advance sound public policy that best serves the interests of restaurant businesses and the millions of people they employ. NCCR members include the country’s most-respected quick-service and table-service chains. NCCR is a division of the National Retail Federation, the world’s largest retail trade group.

Treacy Reynolds
press@nrf.com
(855) NRF-Press

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NRF to Labor Department: salary level recommended under a proposal to expand overtime is too high

WASHINGTON, 2015-9-4 — /EPR Retail News/ — The National Retail Federation today told the Labor Department that the salary level recommended under a proposal to expand overtime is too high, and asked officials to use previous methodology that would result in a lower figure. NRF also said plans to automatically increase the number each year without review should be rejected, and that businesses should be given at least a year to comply once new regulations take effect.

“NRF strongly opposes the Department of Labor’s proposed changes,” NRF President and CEO Matthew Shay said. “Attempting to raise employee wages by fiat ignores economic reality and would end up having major negative consequences for employees, employers and the economy as a whole.”

“As hourly workers, many of the affected employees would receive reduced compensation and benefits and be diverted from career opportunities that are a path to middle-class success,” Shay said. “Not surprisingly, NRF’s research reveals that retail managers largely oppose DOL’s proposed changes.”

“Many employees view being classified as exempt as a badge of professional status,” Shay said. “Being reclassified would be seen by many as a step back in their careers and as a devaluation of their roles in the organization.”

Shay’s comments came in a letter sent to DOL ahead of Friday’s deadline for business groups to respond to the proposal.

Under DOL’s plan, most individuals making up to $970 a week would automatically receive overtime pay at time-and-a-half when working more than 40 hours a week, up from the current $455 set in 2004.

Shay said that amount – $50,440 a year – would cover two-thirds of salaried retail workers and would be “simply too high a level for the low-margin retail industry to bear without severe repercussions.”

The Labor Department chose $970 under a formula intended to give overtime to the lowest-paid 40 percent of all full-time workers nationwide who currently receive a fixed salary. But Shay said 40 percent “is completely arbitrary, lacks transparency and is completely lacking in foundation.” Instead, he said DOL should use the same methodology used in 2004, when the $455 level was based on the lowest-paid 20 percent of salaried workers in the south rather than nationwide and in the retail industry rather than all industries.

Shay said cost-of-living differences mean that setting the level at $970 would provide overtime to more than 45 percent of currently salaried workers in 10 states and more than 50 percent in eight more states – more than double the percentage who now receive overtime.

Shay asked DOL to reject a provision of the proposal that would automatically increase the salary level each year, saying past policy of updating it only when needed “has worked well and there is no need to break with this practice.”

Under federal law, managers and professionals who make more than the salary level can be declared exempt from overtime if they meet certain job duties tests such as having supervision of other workers as their primary duty. The current DOL proposal stops short of suggesting changes in the duties tests, but asks whether such changes should be made. Shay urged DOL not to do so, saying any changes would upset standards settled on since 2004 and “fuel unnecessary and costly litigation.”

A study conducted for NRF by research firm Oxford Economics found that fully implementing the overtime proposal could cost retailers and restaurants alone $8.4 billion a year in added wages. But the study said many employers would offset most of the cost by reducing hours or benefits or using more part-time workers. Nonetheless, employers would see an estimated $745 million in added administrative costs even if workers saw no increase in take-home pay.

NRF is the world’s largest retail trade association, representing discount and department stores, home goods and specialty stores, Main Street merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries. Retail is the nation’s largest private sector employer, supporting one in four U.S. jobs – 42 million working Americans. Contributing $2.6 trillion to annual GDP, retail is a daily barometer for the nation’s economy. NRF’s This is Retail campaign highlights the industry’s opportunities for life-long careers, how retailers strengthen communities, and the critical role that retail plays in driving innovation. nrf.com

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J. Craig Shearman

(202) 626-8134
press@nrf.com
(855) NRF-Press