Throughout the United States, restaurants are dealing with a higher volume of wage and hour lawsuits than ever before. In 2017 alone, U.S. businesses faced 8,261 Federal Labor Standards Act (FLSA) lawsuits — up nearly 7,000 lawsuits from the 1,597 filed in 1997.
Wage and hour lawsuits are filed against restaurants that are accused of having failed to comply with local, state, and federal employment laws, and can result in severe financial penalties for the business involved. Should the employee prevail in court, the restaurant may face fees equaling double the employee’s amount of lost pay, as well as the employees’ legal fees. This is true whether a business’s actions are found to be intentional or due to ignorance. Even if a restaurant is found innocent, their legal fees alone are likely to be in the thousands.
Because wage and hour lawsuits can be detrimental to a restaurant’s finances and reputation, it is important that restaurant managers work to ensure their workplace is in compliance with the labor laws in place. One simple way to do this is by taking a proactive approach to tackling potential employment issues before a lawsuit arises. Many of the wage and hour lawsuits derive from the same common misconceptions and mistakes, so knowing how to handle such scenarios is a great place to start.
Minimum Wages & Tipped Employees
As most employers know, the minimum wage varies by state and locality. For example, while the federal minimum wage is just $7.25, the New York State minimum wage ranges from $11.80 to $15.00 depending on location. For New York City employers of all sizes, the minimum wage is $15.00 per hour. However, New York State law also allows employee tips to count toward an employer’s minimum wage obligations, something that is known as a tip credit.
New York employers are also able to create tip pools, which require employees to contribute a portion of their tips to a sum that is then divided among staff in traditionally tipped positions, such as waiters or bussers. It is important to note, however, that tip pools cannot be used to pay those in management positions.
In order to prevent potential lawsuits regarding wages and tips, restaurant employers should remain up-to-date on all federal and local employment laws. Employers should also maintain and enforce written policies regarding tip credits and tip pool participation.
Overtime pay is required for all non-exempt employees working 40 or more hours in a single workweek. While managers, professionals, executives, and contractors are typically exempt from the overtime rule, most other employees are not. Further, labeling general restaurant employees as exempt in order to avoid paying overtime is a violation of the FLSA. In order to avoid claims regarding overtime pay, employers must honestly and accurately calculate the money owed to employees, compensating them accordingly.
While it is common for employers to round to the nearest 15 minutes when calculating an employee’s hours, these calculations must be consistent “up and down.” In other words, such calculations should favor the employee and employer equally. However, while such practices are legal, and while they make calculating wages more convenient, they can also expose restaurants to lawsuits from employees wanting to confirm the fairness of such practice.
As with wages and tips, the best way for restaurant employers to avoid a suit regarding hours tracking is to have a clear set of policies and procedures for fair and equal timekeeping in place.
With FLSA claims on the rise, it is important that restaurants are proactive in preventing lawsuits in order to protect their reputation and finances. By maintaining up-to-date knowledge of local and federal regulations, and by enforcing policies addressing some of the most common wage and hour issues, employers can tackle employment issues before the legal system is involved.