American Hotel & Lodging Association President & CEO Chip Rogers spoke out after the Department of Labor issued a proposal to increase the minimum salary threshold for employees to qualify as salaried executive, administrative and professional employees (and therefore exempt from overtime pay requirements) under the Fair Labor Standards Act. The proposal would bring the threshold to $55,068, up from the current $35,568—a nearly 55 percent increase.
This would be the second increase in less than five years, and under the proposal, the threshold would automatically update every three years. Employees who fail to qualify for the FLSA’s “white collar” exemption must be paid overtime for any hours worked over 40 in a given workweek, which the association argues can limit managerial and worker development opportunities, such as remote work, travel, and career development.
AHLA will be filing substantive comments, requesting an extension to the 60-day comment period, and surveying members for feedback on the rule.
“Hotels support millions of jobs and drive billions of dollars to state and local economies every year. The Labor Department’s proposal to implement yet another overtime salary threshold increase is a massively disruptive change that would create negative economic impacts for both hotel workers and employers,” Rogers said in a statement. “Small business owners continue to grapple with the rising costs of conducting business and inflationary pressures. If implemented, DOL’s proposal would result not only in crushing increases in labor costs for employers, but also significant tax hikes and administrative costs as well.
"This type of one-size-fits-all mandate from the federal government does not account at all for flexible work arrangements and new opportunities that have become common in the industry. It would also reduce career growth opportunities for employees by forcing businesses to reclassify many workers from salaried to hourly, eliminate middle management positions, and/or cut workers’ hours, consolidate jobs, and create considerable upward pressure across the entire party scale that small businesses will find difficult to absorb. Moreover, the proposed rule's dramatically abrupt implementation timeline adds additional and unnecessary burdens to small businesses struggling to manage the new regulations. We look forward to sharing the concerns and Main Street implications of these new rules with the Labor Department during the comment period."
National Restaurant Association
Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, also issued a statement about the proposed changes:
“Restaurant operators are once again feeling the weight of uncertainty because of a Department of Labor change that will increase their operating costs. The average small business restaurant runs on a 3-5 percent margin, but DOL found that the changes proposed in this rule will increase costs for affected restaurants by 2.5 percent percent. Adding this kind of cost to the already high price of food and years of increasing labor costs will leave many of these operators in the untenable position of raising prices, cutting costs, or closing their doors.”
According to the restaurant group, the typical small business restaurant runs on a 3-5 percent pre-tax margin. Food and labor costs are the two most significant line items for a restaurant, each accounting for approximately 33 cents of every dollar in sales. Other expenses—typically non-controllable costs like credit card swipe fees and occupancy costs—generally represent about 29 percent of sales. For the vast majority of restaurant operators, these three categories increased significantly in recent years.
According to analysis by the National Restaurant Association, in 2019, pre-tax income represented approximately 5 percent of sales for a typical restaurant. For a restaurant with annual sales of $900,000, this translated to pre-tax income of $45,000. If a restaurant today is making total sales equal to their 2019 levels, then they are suffering a pre-tax loss of -12.3 percent.