Anticipating Big Changes to the Food Retail Industry’s Workforce

By: Jennifer Hatcher, Senior Vice President, Government and Public Affairs, Food Marketing Institute

This morning, the U.S. Department of Labor (DOL) released its final rule on overtime pay, which will have significant operational consequences for how food retailers structure their businesses and pay their associates.

We’re thankful that Secretary Thomas Perez listened to our industry’s concerns and didn’t change the duties test at this time, as it is critical that food retail managers are able to perform essential duties and simultaneously lead by example. While the agency did make some improvements in some of the industry’s concerns, there are aspects of the rule that will create new burdens for the industry. First, a rule with changes of this magnitude needs adequate implementation time and starting some thing of this magnitude during the busiest shopping time of the year is a huge concern.

The Rule Limits Scheduling Flexibility

The food retail industry prides itself on a flexible work schedule, which this rule limits. Moving more folks to an hourly schedule reduces the flexibility that managers value and that allows them to plan their schedules around their personal obligations, such as childcare and college schedules.

The Rule Doubles the Salary Threshold Without Regard to Geographic Cost Factors

While FMI agrees that the previous salary level was outdated, more than doubling the salary threshold without taking geographical variations in pay into consideration will have a significant impact on not only on associates, but will adversely impact businesses operating in difference parts of the country. The rule will also punish single store operators since independent grocery stores are less likely to have adequate resources to absorb excessive hikes in payroll in such a compressed period of time even with the December 1 effective date. The Administration must understand the significant operational consequences of the rule that will affect payroll and advancement opportunities for associates.

The Rule Stifles Incentive Pay Adjustments

Incentive pay is an important part of our management compensation. The rule only allows for 10 percent of a manager’s pay to count toward the salary threshold.

DOL provided a helpful chart comparing the current law to the 2015 proposed rule with today’s rule. Additional materials are available via the agency’s overtime page. 

If you have questions or concerns, please don’t hesitate to reach out to FMI’s government relations department.