Posted on February 25, 2016

Ch-Ch-Ch-Changes: How Retail and Restaurant Employees Will Be Affected by FLSA Changes

The elephant in the room is not leaving anytime soon. Though no concrete date has been set by the Department of Labor (DOL) to announce FLSA changes, those changes are coming sometime in 2016. As employers continue to await the anticipated final announcement, some businesses are bracing for the news with heightened concern. This is especially true for retail and restaurant industries.

It’s all about the numbers

According to a National Retail Federation (NRF) report, estimates show that new overtime regulations will affect more than 2 million retail and restaurant employees. Even more, if new regulations are fully implemented, costs could exceed $8.4 billion per year for the retail and restaurant industries. While the potential costs of the regulations are alarming, so too are the implications felt by employees in the two industries. For example, raising the overtime threshold from $455 to $970 per week will mandate overtime pay for many workers, but research conducted by the NRF suggests that the majority of employees will not actually see any increase in take-home pay. Why? As payroll costs rise, employers may be forced to lower employee base wages or limit the amount of hours worked to minimize the impact of increased wages. As a result, affected employees could essentially see little to no gain.

Should it stay or should it go?

To further help offset the added costs, employers could be forced to reclassify retail and restaurant managers and reduce the number of hours they work. Even more, many within the restaurant industry are concerned that the DOL will eliminate the concept of concurrent duties when final regulations are passed. Exempt employees, like store or restaurant managers, are currently permitted to perform duties that are non-exempt in nature and also act in a managerial capacity. These distinctions between exempt vs non-exempt employees are going to become paramount. Managers could lose their exemption status and be prevented from working additional hours to assist a customer or work a cash register in a pinch. In a survey of 200 salaried retail and restaurant managers across the country commissioned by the NRF, 81% believe customer service would suffer if managers could no longer perform non-managerial duties.

The retail and restaurant industry offers employees numerous avenues for career advancement. Employees can begin their career in any position, and through hard work, advance to the highest ranks of the business. Many managers see the new overtime regulations as roadblocks to new possibilities.

Though the final outcome is still unclear, it’s certain that overtime regulations will continue to dominate workplace discussions nationwide. Keep abreast with updates and news in Paycor’s Resource Center. And if you haven’t considered how the changes will affect your business, trust Paycor to ensure you’re prepared. Download our 7-Step Guide to compliance.


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