Restaurant And Hospitality News – November 28, 2016
By Christine Kern, contributing writer
The big news this week is the issuing of a nationwide injunction delaying the implementation of the Obama Administration’s new overtime regulations, which were scheduled to go into effect on December 1, 2017. While the injunction is just a temporary measure, pending the decision of the case on its merits, it bodes well for stakeholders in the restaurant and hospitality industry who were facing some tough decisions in the wake of the new regulations.
Federal Judge Halts Implementation Of New Overtime Regulations
Providing some relief to restaurant and hospitality industry stakeholders, Federal District Judge Amos L. Mazzant III of the Eastern District of Texas has issued a nationwide injunction against the expansion of the new overtime regulations created by the Obama administration, according to the New York Times. The change was scheduled to take effect on December 1, and raised the salary threshold for overtime from $47,476 to $23,660. It impacts approximately 4.2 million workers nationwide, USA Today reported.
The suit was raised by 21 states and dozens of business groups that argued that the new rule would increase government costs in their respective states by $115 million dollars in 2017 alone and could decimate many smaller employers, Bloomberg reported.
In a statement, The Labor Department said, “We strongly disagree with the decision by the court, which has the effect of delaying a fair day’s pay for a long day’s work for millions of hardworking Americans. The department’s overtime rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule. We are currently considering all of our legal options.” This suggests that they might file an appeal. The injunction marks just a temporary measure, suspending the regulation until the judge can study the case and issue a ruling on its merits, and experts suspect that it is likely that he will ultimately strike down the regulation.
“We are, assuming that this preliminary injunction holds and there isn’t an appeal or some other thing that disrupts it, done with this regulation,” asserted Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce, which challenged the rule.
Mooyah Burgers & Fries COO Michael Mabry said that the new regulations had some merit but that they failed to consider the complexity of the restaurant industry. "One of the benefits of getting into the restaurant industry at a young age is the opportunity to advance and create a career," he said. "We have a lot of entry level management opportunities and we are providing a pathway to a career for many young people who are sometimes coming right out of high school or college. I think there could have been more of a stair-step approach here, or a more industry- and city-specific plan that could have accounted for the differences in our industry, and the difference in the cost of living for the various cities we serve."
Toppers Pizza Chief Financial Officer Kendall Richmond also was not surprised about Tuesday's decision, especially in light of the election of Donald Trump. "Part of Trump's agenda that he released recently said that he'd review all Executive Orders in his first 100 days in office," Richmond said. "So, things could move very quickly. Trump has met with Anthony Puzder, CEO of CKE Restaurants, as potential Secretary of Labor. He understands the impact this has on the restaurant industry, and business as a whole. So, if he joins the Cabinet, I imagine this will be rolled back quickly."
In his ruling, Judge Mazzant suggested that the administration lacked the authority to establish a salary limit — which the Labor Department has raised repeatedly since Congress enacted the underlying legislation in 1938. Judge Mazzant did state in a footnote that he was not commenting generally on the legality of establishing a salary limit, however, but just the particular increase that the plaintiffs had challenged. “The court’s decision suggests that the Department of Labor has no authority whatsoever to regulate a salary minimum,” said Allan S. Bloom, of the law firm Proskauer Rose.
“This is a victory for small business owners and should give them some breathing room until the case can be properly adjudicated,” Juanita Duggan, CEO of the National Federation of Independent Business told USA Today. The organization is separately challenging the new overtime regulations.
This is also the fourth time in just 21 months that a federal judge from Texas has issued a nationwide injunction blocking one of President Barack Obama’s executive orders. Other injunctions blocked the shielding of undocumented immigrants from deportation; mandating bathroom access for transgender students; and requiring labor-violation disclosures by federal contractors.
Lawyers from the Justice Department requested Mazzant not to extend the injunction to the 29 states that didn’t sue, to update salary triggers that haven’t changed since 2004, but he denied their request. Rising wages and broad workplace definitions of what constitutes white-collar jobs have “left employees who should not be exempt without overtime protection,” the government said in court filings.
The case is Nevada v U.S. Department of Labor, 16-00731, U.S. District Court, Eastern District of Texas (Sherman).