Restaurants Run Afoul of the DOL

I’ve seen a bunch of news reports recently about the results of a recent “sweep” the Department of Labor carried out among restaurants in Austin, Texas. Some of the audits were triggered by worker complaints, while others were what the DOL calls “directed investigations.” According to the DOL, they uncovered wage and hour violations at 95% of the restaurants they audited! The restaurants involved were required to pay their workers back wages totaling about $330,000. Wow.

What’s even scarier is that this is actually an improvement. The last time the DOL conducted a similar “sweep” in Austin, the noncompliance rate was 98%!

But before we all get too smug, it’s probably a good idea to note that nationwide, the noncompliance rate is still estimated at a hefty 88%. That’s a lot of potential liability out there!

What tripped them up

There were a number of issues cited as particularly common:

Forcing employees to work exclusively for tips.
Not legal. Even in states that allow a “tip credit” to be taken for tipped employees, there is still a minimum wage the employer is required to pay to the worker.
Taking deductions for walkouts, breakages, credit card transaction fees and cash register shortages that reduced the workers’ pay below the minimum wage.
Not legal. Depending on your local laws, you may be limited as to the type and amount deductions you can take in the first place — and no matter what, the amount of the deductions must not be so much that you end up paying workers less than the minimum wage.
Paying straight-time wages for overtime hours worked.
Not legal. Workers paid by the hour do not meet the standard to be exempt from overtime rules. Under the terms of the Fair Labor Standards Act, employees who are eligible for overtime must be paid time-and-a-half if they work more than 40 hours in a work week.
Creating tip pools that include management or the kitchen staff.
As it happens, tip pools can be legal, as long as they follow some basic rules. Notably, if a restaurant takes advantage of the tip credit to reduce the out-of-pocket wages they pay to tipped employees, they cannot include any non-tipped employees in the pool. (There’s a lot more to it than that, so if you are a restaurateur and want to institute a tip pool, be sure to check with your employment law attorney!)

Other common violations I’ve come across in reports from all over the country include such things as paying the kitchen staff a flat weekly salary, regardless of the number of hours worked, and requiring delivery drivers to wait on-premises, unpaid, until an order comes in.

How can you avoid these problems?

Well, a good place to start is to make sure you’re familiar with the applicable wage and hour laws. Nobody in their right mind would say wage and hour laws are simple, but that doesn’t mean it’s safe to ignore them. What gets a lot of people in trouble is assuming they understand all the law’s provisions. The DOL Wage & Hour Division has published a ton of information to help you, including fact sheets, “eLaws advisors,” interpretative guidance and more. Before you assume you’re paying your people according to the law, do your homework.

If you’re serious about limiting your potential liability, find a good wage and hour attorney. Don’t wait until the DOL is knocking at your door! Have the attorney conduct a comprehensive audit of your timekeeping and payroll practices and act on their recommendations. And before you make any changes to your staff or their compensation, be sure to run it by your attorney just to make sure you’re not shooting yourself in the foot.

And (of course) perhaps the most cost-effective measure you can take: accurately record your employees’ work time. There’s no way you’ll be able to properly pay overtime unless you know how much overtime your people have worked. With the variety of highly affordable time and attendance products available these days, there’s no excuse for not keeping track of your employees’ work time.

For instance, with our cloud-based AcroTime solution, the Time & Labor and Scheduling modules work together to ensure you’re not only equipped to minimize your potential wage and hour liability, you’re also positioned to more effectively manage your workers’ schedules. You can ensure you have the right workers in the right places at the right times to maximize your profits.

Do you own or manage a restaurant? What steps have you taken to minimize your wage and hour liability?

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