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New overtime rules: How will they affect the hospitality industry?

On Behalf of | Sep 21, 2016 | Wage & Hour Laws |

The new overtime rules that go into effect on December 1 will affect many different positions in industries of all types.

There are, however, some industries that will be affected more than others. These include retail, higher education and the hospitality industry.

In this post, we will use a Q & A format to address the question of how the new rules are likely to affect the hospitality industry.

What will the new rules do?

Under the current rules for the Fair Labor Standards Act (FLSA), millions of employees don’t get overtime even though they work more than 40 hours. This is because they are considered “exempt” workers. They are classified as executives, administrators or professionals – even though they may be relatively low-level workers such as assistant managers of retail stores or restaurants.

Many of these are workers struggle to make ends meet. Even if they work more than the standard 40-hour workweek, they don’t get time-and-half pay for those additional hours if they make more than $23,660 a year.

The new rules would essentially double that amount, from $23,660 to $47,476. The amount will also be indexed to inflation and increase every three years.

Would employers respond by cutting hours or reclassifying workers, rather than allowing them to get overtime?

There is a lot of discussion about that going on right now in management circles. As we noted in our May 23 post, misclassification is common and workers need to be vigilant about asserting their rights.

Employers still have three months to review and implement their options for responding to the rule. One option is to increase salaries of employees who are currently considered exempt. If you get a raise to a salary above the new threshold ($47,476), you would still be ineligible for overtime.

Another possibility is that your employer could reclassify you as an hourly worker. This is called being “nonexempt.” But in order to avoid paying you overtime, your employer could freeze or cut back your hours and base pay.

In short, there is a lot up in the air in the run-up to the new rule. There is also the fact that the rule is facing legal challenges, including one brought by the attorney general of Texas.

What are those legal challenges?

Texas is one of 21 states suing the U.S. Department of Labor (DOL), contending the new rule exceeds DOL’s statutory authority under the FLSA.

There is also a similar suit challenging the new overtime rules brought by business groups. One of those groups is the Texas Association of Business.

The Obama administration says it is confident that the new rules will prevail. But the lawsuits add an element of uncertainty to an already fluid situation, as employers make key decisions about how to respond to the new rules.

What is the impact of the new rules likely to be in the hospitality industry?

Hotel operators are concerned that compliance with the new rule will be costly because hotels rely a lot on middle managers whose pay is relatively low compared to the scope of their duties.

The hospitality industry is also one that emphasizes flexible scheduling, requiring extra hours at peak times. This could very well trigger overtime pay for assistant managers in hotels, restaurants, bars and country clubs. This is especially true in areas such as Houston with an active convention and tourism industry that brings in large amounts of visitors for various events.

As a result, some analysts believe the hospitality industry may be among those most affected by the new rules. The degree of impact will probably depend a lot on the size of the business, with smaller hotels not as well positioned to absorb added costs for overtime.

Your rights under the law

Change is hard, to be sure. But advocates for working people say that new overtime rules are badly needed. T

The new rules are needed to prevent companies from getting the benefits of long hours from employees who receive so little pay, yet are considered ineligible for overtime because of how the “professional, managerial or administrative” exception to the FLSA has been interpreted.

It may seem confusing, trying to keep up with how all these terms like “exempt” and “nonexempt” apply to you. If you have concerns about how overtime rules affect your job, it therefore makes sense to talk with an attorney who practices wage-and-hour law.


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