Obama-Era Overtime Rule Could be Finished

Chipotle is facing a possible lawsuit in New Jersey regarding the overtime rule.
Chipotle is facing a possible lawsuit in New Jersey regarding the overtime rule.
flickr: Mike Mozart

On Friday, the Department of Labor stepped back from the Obama-era rule that would have made any salaried employee making less than $47,476 eligible for overtime. Former President Barack Obama gave the DOL guidance to update the overtime regulations in 2014, a move that would have impacted roughly 85 percent of American managers at local businesses, according to Homebase’s customer analysis report.

This rule would have been damaging for restaurants, especially in the limited-service sector. Take a recent lawsuit leveled against fast casual leader Chipotle for example. In June, lead plaintiff Carmen Alvarez, a Chipotle worker who was training as a general manager, was part of a lawsuit filed against the chain in New Jersey district court. Alvarez claimed she was working around 10 hours of overtime per week and earning $43,082 a year. When the injunction was issued, she says Chipotle cut the chord on overtime pay. The lawyers representing Chipotle employees said the rule went into place December 1 since the court that ordered the injunction has not repealed the rule. The lawsuit claims the injunction did not apply to private employers and wouldn’t until a final ruling was issued.

Imagine how many restaurant managers and assistant managers are earning less than $47,476 in the U.S. As a federal regulation, the law would have dramatically shifted how foodservice institutions around the nation do business.

In November, a U.S. District Judge in Texas blocked the overtime regulation. The injunction was nationwide but still left enough room for lawsuits like the aforementioned case to wiggle in. How Friday’s announcement will affect this case and other similar claims is unknown for now.

The reply brief from the Department of Labor should clarify the foggy topic for operators, though. However, the brief also mentioned it could still change the rules so more salaried employees would be eligible for time-and-a-half pay in the future.

“The Department has decided not to advocate for the specific salary level [$913 per week] set in the final rule at this time and intends to undertake further rulemaking to determine what the salary level should be,” the brief said.

The National Restaurant Association submitted an amicus brief in the case.

Angelo Amador, executive director of the Restaurant Law Center, issued this statement: “It's great to see a Department of Labor finally taking the time to fully evaluate the impact its regulations will have on businesses. Secretary Acosta has once again proven he is a thoughtful leader who will work in the best interest of the American worker.”