4 Things New Restaurant Owners Need to Know About Labor Compliance

When it comes to labor laws, simple mistakes or misjudgments can lead to thousands of dollars in fines and lawsuits. It’s imperative that new restaurant owners educate themselves and conduct the necessary research regarding labor compliance laws. Existing restaurant owners should review these laws frequently; and ensure they’re up to date with any changes regarding the federal and state labor laws in which they operate.

The Department of Labor’s Fair Labor Standards Act (FLSA) provides the most up-to-date federal guidelines that are necessary to follow in order to remain in compliance. FLSA provides the framework needed for business owners to operate a successfully compliant restaurant business within the compliant minimum wage, child labor, overtime, and recordkeeping laws.

Knowing and understanding labor compliance in your city, state, and country will help keep your restaurant business running smoothly. Keeping excellent and organized employee records also helps in case of audits or potential legal action from a current or previous employee. Ultimately, knowing the facts will help you to keep your business safe. Here are 4 things that restaurant owners need to know about labor compliance.

 

Meal and Rest Break Compliance

Interestingly, federal law does not include meal break or rest break requirements. However in states like California, their labor laws include strict rest and meal break periods requirements. For example: states like California, Maine, and Massachusetts require a meal period for employees working 6 hours or more. As there are no requirements under Federal law, not all states have any requirements around meal and rest breaks. However, as a precaution, many businesses establish and implement a company policy with their own meal and rest procedures. 

Educating oneself on meal and rest break rules is more than making sure that your employees are getting the rest that they need. It may also be a cautionary step to avoid labor lawsuits and employer penalties. Regardless of what type of restaurant you operate, knowing that there are federal laws requiring more frequent breaks for mothers who are nursing or that a “rest period” (20 minutes or less) must be counted as an employee’s worked hours is absolutely essential.

Tip and Gratuity Compliance

It’s understandable if restaurant owners may be slightly overwhelmed or confused by all of the different tip and gratuity laws. But fully understanding them or getting the right help will only help your restaurant business run that much more efficiently. It’s important to know that Federal tip and gratuity laws may differ from state laws and sometimes even among cities or counties within the same state. Depending on the legislature, the law that favors the employee the most takes precedence.

For example:

  • Under Federal law, tip credits are allowed.
  • However in the state of California, tip credits are not allowed as California employers must pay their employees the state’s minimum wage.
  • But tip pooling is allowed. As of 2018, both front of house and back of house employees are allowed to be in a tip pool, as long as employees are being paid minimum wage as reported by Gov Docs.

Tip pools can be complicated. Doing your homework will help ensure that you’re following the correct labor laws; especially when determining which ones may hold precedence over another.

Overtime Compliance

Regarding overtime labor compliance, the first step is distinguishing nonexempt vs exempt employees. Consider overtime thresholds as they are not only based on salaries but day to day tasks of a particular position. It is easy to consider someone exempt by classifying him or her as a manager, however, there are strict laws regarding how to distinguish an exempt vs non exempt employeeAn employee’s job title does not automatically make him or her exempt. There are particular qualifications for exempting an employee depending upon the position and the overtime law that is most favorable to the employee must be adhered to by all employers. These types of labor and compliance laws are essential to understand and it is recommended that you seek help from an attorney or other qualified professional to make sense of them as penalties are steep and lawsuits are easy to follow suit. 

The next step is recognizing what’s included in overtime calculations. Depending on the state, all employee’s wage must be considered when calculating overtime. As for the overtime rate, it must be paid at a rate of at least one and one-half times the employee’s regular rate of pay for each hour worked over 40 hours per week. In some states like California, daily overtime is also observed.

One last thing to keep in mind is to put in place some sort of labor hour tracking system. Whether it’s an excel sheet, Google sheet, or payroll software, it’s much more effective keeping detailed and concise records with an effective timekeeping system in place. In the case an audit arises or if employees request their labor hours, it’ll be a cake walk to find!

Minimum Wage Compliance

This set of labor compliance laws is interesting since there are many differing local, state, and federal minimum wage law requirements. The current federal minimum wage is $7.25, yet some states have exceeded that. As a restaurant owner, it is essential to know that if federal or local minimum wage requirements differ from state ones, an employee must be paid the highest of the three rates. As for tip credits, restaurants must adhere to the restaurant federal $2.13 minimum wage and be sure the tips add up to be equal or above the minimum wage.  

 

Restaurants have more factors to take into account than a typical business when managing labor. Labor laws are complicated and vary widely from state to state or county to county. Before opening your restaurant for business, it’s recommended that you have an optimal time tracking system in place; along with a thorough understanding of all of the labor laws that may affect your business. Make sure you ‘re ready when your business’ doors open so you can concentrate on both maintenance and growth!