Washington Report: Legislation Impacting the Restaurant Industry

In an effort to keep you up-to-date on industry issues, Foodable has created the Washington Report, an "On Foodable Weekly" edition dedicated to discussing legislation facing restaurant owners and operators. This week, we talk about at the Affordable Care Act, the New Joint Employer Standard, and the Department of Labor’s recently updated overtime regulations. Guests Fred LeFranc and Larry Reinstein give us insights on what is being seen inside restaurants in reaction to these issues.

Affordable Care Act

The Affordable Care act has been lauded for providing health care benefits to many employees who otherwise would not have those benefits. However, the definitions within the legislation are causing an upset among restaurant owners. As it is currently written, the ACA says that large companies are legally required to provide all full-time employees with health care benefits. The legislation defines a large company as one with 50 or more employees and defines a “full-time” employee as an employee working an average of 30 hours per week for any given month.

According to the National Restaurant Association, this is a major issue for restaurants because they are labor-intensive, have low profits per employee, and have a significant number of “part-time” employees.

Joint Employer Status and Franchising

The National Labor Relations Board (NLRB) updated the Joint Employer standard in response to a case involving Browning-Ferris Industries and a subcontracted company. The NLRB transformed the joint employer standard into a two-part test that now considers whether a common law employment relationship exists and whether the potential “joint employer” possesses control over employees’ essential terms and conditions of employment. The critical distinction is that “control” can now be direct, indirect, or even a reserved right to control, whether or not that right is ever exercised.

"[Franchisors] need to provide some form of assistance. The question is, does that violate that separation of church and state and the Chinese wall?" asks Chaos strategist Fred LeFranc. "This ruling, if it threatens that, then it essentially dissolves the benefit of having intellectual capital of a franchise program."

Previously, the Joint Employer Standard had said joint employer status only existed when two separate entities shared direct and immediate control over essential terms and conditions of employment like hiring, firing, discipline, supervision, and direction. This new standard could make franchisors liable for employment law violations committed by their franchisees and as such has caused many franchisors to provide less assistance.

Department of Labor Overtime Rule

On May 18, the Department of Labor finalized their rule updating overtime regulations, increasing the salary threshold below which most white-collar, salaried workers are entitled to overtime. Currently, those non-exempt employees making $455 per week or less are entitled to be paid time and a half for overtime work. Starting December 1, those employees making $913 or less will also be entitled to overtime pay.

This means operators will either need to:

  1. Pay time-an- a-half for overtime work
  2. Raise workers’ salaries above the new threshold ($913/week)
  3. Limit workers to 40 hours per week

Future automatic updates based on wage growth are also in place to update those thresholds every three years beginning in 2020.