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The Cost of a Restaurant Wage Violations

Friday, July 29, 2016

Hospitality jobs are often filled by young employees and foreign workers being paid minimum wage and who, for a variety of reasons, may not fully understand their rights as employees.

Unfortunately in the restaurant industry specifically, labor violations on the part of employers (whether intentional or not) are all too common. These violations can lead to detrimental repercussions for employers. Recently in the state of Wisconsin, the US District Court ordered a restaurant group to pay employees $700k in back wages and damages.

There are a wide variety of laws and regulations inherent to the restaurant industry and it’s critical for restaurant owners and operators to fully understand employee rights and wage laws in order to protect their business and create a workplace that is in compliance.


Some Common Wage Violations in the Restaurant Industry

  • Salaries: Employers will often pay employees fixed salaries without regard to how many hours they worked. Labor laws typically require a minimum salary in order for employees to be exempt from overtime, so paying a salary to an employee that falls short of the minimum can lead to overtime violations when employees work more than 40 hours in a week. 
  • Combined Hours: If an owner operates more than one restaurant location and fails to combine hours an employee works in a pay period at multiple locations, this can lead to overtime violations.
  • Uniform Cost: Many employers require employees to purchase their uniform from the company and in turn the employer deducts the uniform cost from the employees pay. Should that deduction effectively reduce the employee’s hourly wage below the federal minimum, it could be a violation.
  • Improper Overtime Calculations: Employers may miscalculate overtime based on hours worked per day as well as days worked per week. As an employer, you are responsible for knowing and abiding by overtime laws in your state.
  • Failing to Pay: Employers underpaying their employees, deferring payment of wages to a later period, or not paying workers at all are blatant violations.
  • Working only for tips: Some employers have required servers to work only for tips and fail to log them as employees on company records. This will constitute a violation.
  • Failure to Maintain Records: Failing to maintain accurate records of employees’ wages and hours worked is also a violation.

How Restaurant Owners Can Ensure Compliance

  • Get Educated on Federal Laws: Most employers want to be in compliance and their violations often stem from a foundational lack of knowledge of wage and labor laws. The US Department of Labor provides clear information regarding federal wage and labor laws and will help employers to get in compliance.
  • Get Educated on State Laws: Labor laws will vary from state to state so check with your state government’s labor department to get up to speed.
  • Create a Compliance Program: Once you’re educated on the laws and have put measures in place to achieve compliance, put a system of checks and balances in place to ensure that labor and wage laws are being upheld and compliance standards are up to date. It’s also important to provide employees with a vehicle for feeding back to management and a mechanism for resolving their issues before they take their complaints to the government.

At The Horton Group, We help businesses lower the true cost of their risk by focusing on risk management, supported by the best claims advocacy, loss control and core insurance services available. Contact us to discuss what we can do for you.

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Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.