Restaurant And Hospitality News – May 23, 2016

The new overtime regulations released by the White House have dominated the news this week, raising questions about their impact on the restaurant industry, while new data suggests that the hotel industry may be heading for recession.

New Overtime Regulations Poised To Have Significant Impact On Restaurant Industry

The White House has released the details of the new Department of Labor overtime pay rules, raising the overtime exempt threshold from $23,660 to $47,476 per year. This is the cap under which most salaried workers are guaranteed overtime.

Under the new federal rule, the threshold at which companies can deny overtime was nearly doubled, which could force restaurants to pay millions in additional salary to managers and assistant managers and require more careful oversight of overtime hours in general, according to The Nation’s Restaurant News.

The new regulations also stipulate that this new level will be automatically updated every three years to ensure that workers continue to earn the pay they deserve. The rule will go into effect December 1, giving employers more than the 60 days that was expected to adjust to the new regulations.

The announcement included both a fact sheet and an email from President Obama on the new rule, which also raises the "highly compensated employee" threshold from $100,000 to $134,004. Over this cap, only a minimal showing is needed to demonstrate an employee is not eligible for overtime. There will be no changes to the existing "duties test," and it will allow bonuses and incentive payments to count toward up to 10 percent of the new salary level. 

Critics of the new rule believe that they will be more expensive for employers and have a negative impact on salaried employees who are now required to track their hours to keep them under the 40-hour overtime limit. 

"This is an extreme revision in the white-collar threshold," David French of the National Retail Federation told the Times. "By executive fiat, the Department of Labor is effectively demoting millions of workers."

And Angelo Amador, senior vice president of labor and workforce policy and regulatory counsel at the NRN stated, “The threshold for exempt employees in the final regulations is still too high. Restaurants operate on thin margins with low profits per employee and little room to absorb added costs. More than doubling the current minimum salary threshold for exempt employees, while automatically increasing salary levels, will harm restaurants and the employer community at large.”

Many in the restaurant industry are determined to challenge the new regulations. Rob Green, executive director of the National Council of Chain Restaurants, called the new standard “outrageous,” and stated that, “By dramatically increasing the wage threshold for determining a restaurant manager’s overtime eligibility, key management positions will be eliminated, restaurant employee career advancement will be derailed and workplace morale will plummet.”

“We will continue to fight this punitive regulation and will work with Congress to make the Labor Department go back to the drawing board to find a workable solution.”

Study Finds U.S. Hotels Knocking On Recession’s Door

US hoteliers saw flat sales for April, according to the latest Hotel Industry’s Pulse (HIP) indicator, a predictive analytic that gauges monthly overall business conditions for hotels. March saw just a 0.1 percent increase, and April’s reading was static. The HIP six-month growth rate has historically confirmed the turning points in US hotel business activity, suggests that the probability of the hotel industry being in recession is rising. Currently, it stands at 40.9 percent; when it is near or passes the 50 percent threshold, the US hotel industry has entered a recession.

“The slowdown in the growth rate of HIP continued in April. In the last 10 months, monthly growth rates varied between (+0.1) and (-0>1) with three months posting nil growth,” explained Maria Sogard, CEO of eforecasting.com. “We have not seen any solid gains in predictive analytics for a long time.”

Of three total indicators, only one saw positive figures for April: Total Spending on Hotels (including non-room revenues). Both Hotel Jobs and Hotel Capacity saw negative or zero contribution to HIP’s change.

“Two turning-point predictive analytics, recession probabilities and the long-term growth rate, show underlying trends leading to a recession for US hoteliers. The readings of analytics over the next three months are critical to confirm the industry’s position in the business cycle,” stated Evangelos Simos, research advisor for predictive analytics at e-forecasting.com.