Restaurant Trade Groups Sue to Block DOL Overtime Threshold Increase

A coalition of restaurant trade groups filed suit in federal court on January 15, 2026, asking a judge to vacate or enjoin the U.S. Department of Labor’s new overtime-exemption threshold before it takes effect midyear. Plaintiffs include the Restaurant Law Center, the legal arm of the National Restaurant Association, the Texas Restaurant Association, the International Franchise Association and other industry groups. They challenge a rule that raises the salary level for the white-collar overtime exemption and permits the Department to update that threshold periodically.

The rule would make many salaried restaurant managers and supervisors newly entitled to overtime pay if their annual pay falls below the new threshold. Plaintiffs argue the regulation improperly substitutes a salary test for the duties test that Congress intended and that the agency lacks authority to set the threshold at the levels contained in the regulation. The trade groups asked the court to expedite review, citing the midyear effective date and the need for swift clarity.

For restaurants, the potential workplace impact is immediate and operational. If the suit fails, employers may have to reclassify staff, track overtime for more managers, raise salaries to preserve exempt status, or alter schedules to limit overtime exposure. Operators say the rule will increase labor costs and add administrative complexity to payroll and timekeeping systems already strained by high turnover, variable shift patterns and tip-share rules. For staff, the change could mean more overtime pay for salaried employees who currently work long hours without extra compensation; it could also prompt reduced hours or job restructuring that changes day-to-day responsibilities.

The dispute centers on competing interpretations of long-standing overtime law. Restaurants contend that the duties test - which looks at the nature of an employee’s work - should govern exemption, not a salary threshold that can be adjusted by agency fiat. The Department of Labor argues the updated salary level and periodic adjustments are necessary to reflect modern labor markets, although the coalition says those changes exceed the agency’s statutory authority.

Beyond the immediate litigation, the rule’s provision allowing periodic updates introduces uncertainty into long-term workforce planning. Employers that consider raising base pay to maintain exempt status may find themselves revisiting those decisions whenever the Department adjusts the threshold.

Next steps include the court’s handling of the request for expedited review and whether a temporary injunction will be issued before the rule takes effect midyear. Meanwhile, restaurant operators should review pay practices, audit exempt classifications, and model scenarios for overtime exposure so they can move quickly once the legal path becomes clearer.