5 Tips For Restaurants to Prepare for the New Overtime Laws

It seems like labor laws are constantly changing and, like it or not, they show no signs of stopping.  So, the hospitality industry must be prepared.  Restaurant operators and managers are busy enough as it is with day-to-day operations, but Overtime Law changes are coming.  As December 1st approaches, and the industry braces for impact, there are a few things operators can do to soften the blow. Do your best to have all the facts, so you can make the most informed decision for your team.  Take the time to evaluate your team’s skill set, and see who is capable of taking on extra duties. Then make communication of the FLSA changes crystal clear to all restaurant staff, regardless of position.  The communication and execution of these changes can vary, but every restaurant owner/ operator should have a system, like Harri, in place to keep track of labor costs, performance, and scheduling.  This will help ensure complete control over your labor costs once these impending laws go into effect.    


1. Have All the Facts and Make an Informed Decision

As of December 1st, 2016, the new minimum salary level employee exemptions under the Fair Labor Standards Act (FLSA) are being brought up to $913 per week, or $47,476 per year. With the national average of restaurant managers being $46,406/yr there will definitely be a ripple in the hierarchy of every restaurant. The law dictates that employees, who do not meet the new salary requirements, they will no longer qualify for these exemptions, which means they will have to be paid overtime compensation when they work more than 40 hours in a workweek.  The transition will require many restaurant owners and operators to make some tough decisions about their current management staff.  Any managers making under the new exemption minimum will either need to be bumped up to the new current rate, or be made into hourly managers.  Either way labor costs will go up driven by the new management overtime pay rates or by increasing current management salaries.  The risks include rearranging restaurants’ already delicate management ecosystem by dispersing duties amongst hourly managers.  The alternative is to have less managers, which risks overloading them with work, when the average manager already works 50+ hours/week.  The key is to honestly and fully evaluate management team’s skills, then proceed to divide and conquer from there.


2. Evaluate Your Employees' Skills

Rebuilding staff from the top down will be a challenge, but it could also be a great opportunity to recognize current talent, while delegating managerial tasks to more people - killing two birds with one stone.  More strong, tenured line-level employees would hold management titles, and yet still be hourly staff on payroll.  The con is that OT must be monitored very carefully, as it is normal for most restaurant managers to work well over 40+ hours a week.  Restaurant operators must think strategically, and know their staff very well for this scenario to succeed.  Being able to identify workers’ weaknesses and strengths is key, when delegating these new managerial duties.  In the case of a full service restaurant, this depends on how much an operator would want to change the formula of the usual managerial hierarchy: GM, AGM, Floor Managers, etc.  This would depend on how many shifts a restaurant has, and the flow of service which differs on a restaurant by restaurant basis.  With these factors in mind, a stronger work dynamic may emerge as multiple team members work together with their new responsibilities - just keep overtime in check with appropriate systems such as Harri’s TeamLive.  


3. Have a Discussion with ALL Staff

When it comes to this discussion a solid training program will become your greatest asset here.  As the holiday season nears, some restaurants may either up their staff or downsize it.  This can be the perfect time to begin streamlining your training and bulking up on staff to see who rises to the top.  If restaurant is downsizing, keeping as many workers as they can with management potential would be wise.  These are the ones an owner or operator can count on to be responsible for extra managerial tasks on top of their current duties.  As for restaurants bulking up for the holiday season, more is more.  Quantity can produce quality, as the season comes to a close evaluating the workers gained at this time will help make decision making easier.  The best staff will always rise to the occasion and be able to take on more responsibilities - letting your current managers at the new salaries be able to work without being overwhelmed.  


4. Make a Plan

Since the new salary threshold is more than double the current minimum salary level, currently at $455 per week, or $23,660 per year, serious adjustments must be made in both staffing and scheduling.  The biggest decisions being: hire less managers or to try distributing duties amongst multiple employees.  Having an open dialogue with entire management and line-level team, may help to dodge losing some strong employees because of the misunderstandings.  If a restaurant presently has several managers under the incoming salary exemption; one may want to consider asking the managers themselves if any of them would like to move to hourly.  Of course, this depends on how well a management team works together, some managers may fight to stay salaried and argue to have their salaries increased.  However, operators may be pleasantly surprised. There are managers, who would rather go to hourly, believing that the overtime would give their income a boost.  For those who may not be so lucky, tough decisions will have to be made, and the staff that stays will most likely be the most reliable of the bunch.   


5. Know Your Resources

So, now what? This is a summary of the overtime changes ahead, but there is more to come: communicating to restaurant teams, avoiding lawsuits, and staffing after all the overtime changes go into effect.  Lawyer consultations are not always free, and who has the time to make call after call trying to find answers.  Here’s a short list if you’re still feeling overwhelmed.  

  • https://labor.ny.gov - The mission is the protect workers, assist the unemployeed and connect job seekers to jobs. They can even offer Human Resources Consultation services, if you’re completely in the dark.

  • http://www.govdocs.com/ - Make compliance simple by adding posters all around your staff breakroom and locker area.  Be able to communicate new laws and regulations to your staff visually.  Also stay updated with their blog, with HR and compliance news nationwide: http://www.govdocs.com/blog/

  • www.harri.com -  Hospitality’s all encompassing system to source, hire and manage talent.  Most recently did a webinar on the subject, “Overtime Changes Are Coming: Is Your Restaurant Ready?” - please email maria.gee@harri.com for a copy of the slides.  

  • http://www.nylaborandemploymentlawreport.com/ - Published by some of the most leading Law and Employment lawyers in the field.  The blog is constantly updated, and adding your email address to this mailing list might be a wise decision.