New Federal Overtime Eligibility Rule Will Hurt Small Business

Contact: Christy Moran



Washington, D.C. – May 19, 2016 – The Department of Labor has released its final ruling on overtime eligibility which calls for doubling the salary threshold for employees to be considered exempt from receiving overtime pay from $23,360 to $47,460.  Anyone making a salary of less than $47,460 will automatically qualify for overtime pay when they work more than 40 hours a week. 

According to the American Pizza Community (APC), which collectively represents the nation’s large and small pizza brands and franchise owners, the new federal rule will negatively impact the current flexibility for restaurant employees, and create significant increases in administrative costs for restaurants already operating on thin margins.  In fact, the National Retail Federation estimates that the new rules – the latest example of continued over-regulation on small business – will cost retail and restaurant businesses $745 million to comply.    

The federal rule, which goes into effect on December 1, 2016, will not only impact small business owners.  Other workers in the private sector industries will also struggle to absorb the added cost, notably nonprofits, social service organizations and universities.  

Tim McIntyre, Chair of the APC, cites that the change will strain job and income growth. “This will be a significant cost and regulatory burden on employers, who will face pressure to cut employee hours and benefits, and make do with less workers and reduced job creation,” said McIntyre.  “Businesses will also look to implement automated technology to minimize or eliminate the need for human involvement, and the restaurant industry will likely to be no exception.”

The negative impact on job creation and job opportunity will be felt across the workforce as many hard-working store managers may have to switch from a salaried employee to an hourly worker.  Hourly employees who will need to punch a time clock and not enjoy the benefits offered to salaried employees. “Restaurant managers are the backbone of our industry, and it is incredibly disappointing that many may have to forego the privileges that come with salaried employment, which they have worked so hard to achieve,” continued McIntyre.  “This will hurt morale and hiring, as a whole, for this incredibly important position within restaurants,” continued McIntyre.

Other aspects of the new overtime eligibility rule include:

  • Allowing employers to apply bonuses and incentive payments to up to 10% of the new salary threshold;
  • Threshold updates every three years instead of annually, aligning them with inflation;
  • And, clarification of the “duties test” which employees must perform to be exempt.

About The American Pizza Community

The American Pizza Community is a coalition of the nation’s large and small pizza companies, operators, franchisees, vendors, suppliers and other entities that make up the American pizza industry.  The coalition was formed in 2010 to advocate for policies affecting pizza companies and operators including menu and labeling information, fair wages, work opportunity tax credit, background checks, tax policies and small business access to capital.

Current members include Blackjack Pizza, Breadeaux Pizza, California Pizza Kitchen, CiCi's Pizza, Domino’s Pizza, Figaro’s Italian Pizza, Godfather’s Pizza, Hungry Howie’s, Hunt Brothers Pizza, the International Pizza Hut Franchise Holders Association, Little Caesars, Nick-N-Willy’s, Papa John’s Pizza, Papa Murphy’s Pizza, Papa's Pizza To-Go, Papa Romano's Pizza, Pieology, Pizza Factory, Pizza Schmizza, and Sam & Louie's Pizza. Supplier partners include Coca-Cola, Leprino Foods Company, Middleby Marshall, Paradise Tomato Kitchens, PepsiCo and Tyson Foods.  Affiliate partners include the Consortium for Common Food Names, the National Pork Producers Council and the Tomato Products Wellness Council.