Restaurant owners are confronted with myriad of legal and regulatory issues on a daily basis. From labor laws to safety regulations, restaurant owners must be diligent to ensure that they remain in compliance. Following are some responses to frequently asked questions that will help you navigate the legal and regulatory maze. If you have further questions, as a TRA member, you can contact TRA general counsel for more information.

Can I deduct losses from shortages or breakage from employees' salary?

What is the Texas Payday Law and how does it apply to my business?

How do I comply with the Texas Payday Law?

What are the penalties for failing to comply with the Texas Payday Law?

How should I calculate working hours?

How much time am I required to give for breaks and meals?

What overtime regulations apply to restaurants?

What overtime rules apply to my tipped employees?

How do I calculate overtime for employees that work at more than one of my restaurants?

What about overtime for employees who do more than one type of work?

How do I know if I must pay for employees work clothes?

Who is responsible for maintaining the uniforms?

Can I deduct a security deposit for uniforms from an employees wages?

How do child labor laws apply to restaurants?

Can I deduct losses from shortages or breakage from employees' salary?

Except for the tip credit and the meal and lodging credit, the federal law permits no other deduction from the wages of a minimum wage employee. That means that losses from shortages, breakage, walkouts and the like may not be deducted from the wages of a minimum wage employee, nor can a minimum wage employee be required to pay for such losses, directly or indirectly. For those employees being paid in excess of the minimum wage, deductions for such losses may be made, but only to the extent of the excess and only with the prior written consent of the employee. It is also important to note that tipped employees may not be required to pay for such losses from their tips.

What is the Texas Payday Law and how does it apply to my business?

The Texas Payday Law was enacted in 1915 to investigate disputed wage claims between employees and employers. Every private individual, sole proprietor, partnership, corporation, organization, association, or business entity that employs one or more persons is subject to the Texas Payday Law. Size or gross income is irrelevant. All disputes arising from violations of the Payday law are administered by the Texas Employment Commission (TEC).

 

How do I comply with the Texas Payday Law?

Pay wages at least twice a month to employees not exempt from overtime, and at least once a month to those exempt. Pay commissions, bonuses and fringe benefits on time, as agreed to in writing or within a reasonable time.

Make semi-monthly pay periods as equal in length as possible.

Designate paydays. If you do not, the law says they are the first and 15th of each month.
Post notices of paydays in conspicuous places.
Pay an absent employee on a regular business day at the employee's request.
Pay a discharged employee in full no later than the sixth day after discharge, and other employees who leave no later than the next scheduled payday.
Pay wages by electronic funds transfer, check negotiable on demand or cash unless the employee agrees in writing to payment in another form.
Send wages by registered mail to arrive by payday, or deliver wages to employees at work unless a written employee agreement states otherwise.
Do not deduct from an employee's wages unless ordered by a court of competent jurisdiction, authorized by state or federal law, or authorized for a lawful purpose in writing by the employee.

What are the penalties for failing to comply with the Texas Payday Law?

The Texas Employment Commission could require an employer who acted in bad faith in not paying a wage claim to pay an administrative penalty in an amount not to exceed the amount of the wage claim or $1000.00.

How should I calculate working hours?

In general, "hours worked" includes all the time an employee is required to be on duty, on the employer's premises, or at a prescribed work place. "Hours worked" also includes all times an employee is permitted to work for the employer. This means that any work the employer permits, even though the employer does not request it, is working time.

For example, an employee may voluntarily continue working at the end of the shift. He or she may want to finish an assigned task, to correct errors, or to prepare time or production reports. The reason is immaterial; if the employer knows or has reason to believe that the employee is continuing to work, then that time must be counted as hours worked. This basic rule applies also to work performed away from the employer's premises or the job site, or even at home.

In all such cases, management has the right to exercise control and to see that the work is not performed if the employer does not want it to be performed. Management cannot sit back and accept the benefits without compensating for them. Merely declaring a rule against such work is not enough. Management has the power to enforce it and must make every effort to do so.

How much time am I required to give for breaks and meals?

An employer is not required to give employees a rest break or meal period. However, rest breaks of short duration, designed to promote employee efficiency and running under 30 minutes, are common in the foodservice industry. The time must be counted as hours worked.

Bona fide meal periods during the scheduled workdays are not considered work time under the FLSA, and the employer need not pay employees for such periods. Ordinarily, 30 minutes or more is considered a bona fide meal period. In order for bona fide meal periods to be excluded from compensable working time, the employee must be completely relieved from duty for the purpose of eating regular meals. The meal period must be uninterrupted except for a rare or infrequent emergency call.

What overtime regulations apply to restaurants?

The following is a summary of the U.S. Department of Labor's (DOL), new regulations regarding overtime exemptions which are effective as of Aug. 23, 2004. For more detailed information we refer you to the U. S. Department of Labor's Web site www.dol.gov/fairpay for full details on all aspects of the new over-time regulations. Employers also can e-mail the DOL at [email protected] or call (866) 4-US-WAGE with questions. None of the following information is intended to be a substitute for the advice of counsel.

The overtime regulations effective Aug. 23, 2004, require that each of the following three tests be met for an employee to qualify as exempt from federal overtime-pay requirements:

TEST #1: "SALARY-BASIS" TEST

To qualify as exempt, an employee must be paid on a "salary basis." This means employees must receive a pre-determined and fixed minimum salary that is not subject to reduction because of variations in the quality or quantity of work performed. Each pay period (either weekly or less frequently), the worker must receive a predetermined amount for any week in which the employee performs work, regard-less (except for narrow exceptions) of the actual number of days or hours worked. The logic behind the salary-basis requirement is that if employers can make deductions from salaried employees' pay for periods of one or more full days, the employee is not really paid on a salary basis.

TEST #2: "SALARY-LEVEL" TEST

Executive, administrative and professional employees must earn a minimum salary to be considered exempt from federal overtime-pay requirements. Under the new rules, the minimum weekly salary level required for exemption is $455 per week ($ 23,660 a year).

TEST #3: DUTIES TEST

To be exempt, a "white-collar" employee must perform a job that primarily involves executive, administrative or professional duties. Here are the "duties tests" for each of these categories.

1. EXECUTIVE EXEMPTION
In the restaurant industry, many employees are exempt from federal over-time-pay requirements because they fall under the executive exemption, also known as the managerial exemption. Prior to Aug. 23, 2004, federal over-time rules offered two tests known as the "long" and "short" tests that employers could use to weigh whether employees met the definition for the executive (managerial) exemption. The new rules get rid of the old "long" and "short" tests and simplify the duties test for executive (managerial) employees into one three-part standard.

Employee is considered an "exempt executive" if:

(1) The employee's primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof.

(2) The employee customarily and regularly directs the work of two or more other employees or their equivalent.

(3) The employee has the authority to hire or fire other employees, or his or her suggestions and recommendations as to the promotion, hiring, advancement, or any other change of status of employees are given particular weight.

To be exempt from overtime pay requirements, executive (managerial) employees must meet tests for both salary and duties. The DOL offers a clarification to distinguish exempt executives from non-exempt employees. According to the rules, exempt employees generally have the ability to "make the decision when to perform nonexempt duties and remain responsible for the success or failure of business operations under their management while performing the nonexempt work." The DOL provides an example relevant to the restaurant industry of an assistant manager who performs work such as serving customers, cooking food, stocking shelves and cleaning. The DOL says that performing such non-exempt work does not eliminate the exemption if the assistant manager's primary duty is management. It concludes: "An assistant manager can supervise employees and serve customers at the same time without losing the exemption."

2. ADMINISTRATIVE EXEMPTION
The second major exemption from federal overtime-pay rules is for certain "administrative" employees. The new rules make only modest revisions to the old rules in this area. In general, the rules require that exempt administrative employees have a primary duty of "performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers." The new regulations also maintain, but clarify, the old requirement that exempt administrative employees exercise "discretion and independent judgment." The DOL elaborates in the new rules to note that discretion and independent judgment must be exercised "with respect to matters of significance," which refers to the level of importance or consequence of work performed.

3. PROFESSIONAL EXEMPTION
Professionals including both "creative professionals' and "learned professionals" may be exempt from overtime-pay requirements if they meet certain duties tests and pass the salary-basis and salary-level tests.

"CREATIVE PROFESSIONALS" In its discussion of various occupations that may be considered exempt from federal overtime-pay requirements as "creative professionals," the DOL notes that it "agrees [with the National Restaurant Association] that certain forms of culinary arts have risen to a recognized field of artistic or creative endeavor ..." According to the DOL, "to the extent a chef has a primary duty of work requiring invention, imagination, originality or talent, such as that involved in regularly creating or designing unique dishes and menu items, such chef may be considered an exempt creative professional." In explanatory notes, the DOL cautions that "there is a wide variation in duties of chefs, and the creative professional exemption must be applied on a case-by-case basis with particular focus on the creative duties and abilities of the particular chef at issue. The [DOL] intends that the creative professional exemption extend only to truly 'original' chefs, such as those who work at five-star or gourmet establishments, whose primary duty requires 'invention, imagination, originality, or talent. To qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of creative endeavor as opposed to routine mental, manual, mechanical or physical work.

"LEARNED PROFESSIONALS" In a new section of the regulations the DOL specifically defines how chefs might meet the definition for "learned professional." According to Section 541.301 of the regulations, "Chefs, such as executive chefs and sous chefs, who have attained a four-year specialized academic degree in a culinary arts program, generally meet the duties requirements for the learned professional exemption." The regulations caution that "the learned professional exemption is not available to cooks who perform predominantly routine mental, manual, mechanical or physical work." To qualify for the learned professional exemption an employee's primary duty must be the performance of work requiring advanced knowledge (work that is pre-dominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment). The advanced knowledge must be in a field of science or learning. The advanced knowledge must customarily be acquired by a prolonged course of specialized intellectual instruction.

What overtime rules apply to my tipped employees?

Employers should be careful when calculating overtime for tipped employees. Employers should keep in mind that the law requires that an employee's regular rate of pay -- that is, the rate used to determine overtime -- can never be less than the applicable minimum wage rate.

For example, take an employer who pays tipped employees the current federal minimum wage of $5.15 per hour. Current federal law allows the employer to take a tip credit of $3.02 an hour ($5.15-$2.13 cash wage) against the wages paid to tipped employees.

In this case, the overtime rate is calculated not by multiplying the cash wage of $2.13 by 1.5, but by multiplying the employee's regular rate of pay -- $5.15 -- by 1.5, and then subtracting the hourly tip credit of $3.02. The result is an overtime rate of $4.71 an hour ($5.15 x 1.5 = $7.725; $7.725 - $3.02 = $4.705 or $4.71 when rounded).

In other words, the employer may take the full tip credit against the overtime rate, but the hourly tip credit for overtime hours cannot exceed the hourly tip credit for the first 40 hours.

As noted in Chapter 4, service charges distributed to employees are wages and thus become a part of the employee's regular rate of pay.

For example, for employees paid the current federal minimum wage of $5.15 per hour plus service charges of $10 per hour, the overtime rate after 40 hours a week is $22.73 per hour ($15.15 x 1.5 = $22.725, or $22.73 if rounded).

Or, as Chapter 4 explains, the employer may use service charges to meet his or her obligation to pay workers the minimum wage. For example, the overtime rate for an employee receiving service charges of $10 an hour (which includes the current federal minimum wage of $5.15 per hour) is $15 per hour ($10 x 1.5 = $15).

How do I calculate overtime for employees that work at more than one of my restaurants?

Assume restaurants 'A' and 'B' are owned or controlled by the same person or group and that an employee works for restaurant 'A' for 30 hours and for restaurant 'B' for 20 hours.

Should the employee receive overtime pay for working a total of 50 hours a week? Or is the employee considered to be working for two separate employers -- 30 hours for one, 20 for the other -- and, thus, no overtime is involved?

The answer lies in the ownership and control of the two restaurants. If the restaurants are owned or controlled by the same people, even though they have two separate names and maintain two separate payrolls, then the employee would be entitled to overtime for all hours worked after 40. If the two restaurants were owned or controlled by different persons or groups, then no overtime pay would be necessary.

What about overtime for employees who do more than one type of work?

How does an employer compute the overtime rate for an employee who in a single workweek works at two or more different types of work for which different non-overtime rates of pay (of not less than the applicable minimum wage) have been established?

According to the regulations (29 C.F.R. § 778.115), the employee's regular rate for that week is the weighted average of such rates. That is, the employee's total earnings are computed to include the employee's compensation during the workweek from all such rates, and are then divided by the total number of hours worked at all jobs.

Use as an example an employee who during a week works 40 hours as a server for $5.15 an hour and 10 hours as a hostess at $5.50 an hour.

The employee's regular rate of pay for that week is $5.22 an hour -- i.e., a weighted average of the two rates. ($206 [40 hours @ $5.15] + $55 [10 hours @ $5.50] = $261; $261 divided by 50 hours = $5.22). This means that the employee's overtime rate for that week is $7.83 ($5.22 x 1.5).

Based on this overtime rate, the employee must be paid compensation for that workweek of $287.10. (40 x $5.22 = $208.80; 10 x $7.83 = $78.30; $208.80 + $78.30 = $287.10).

In multi-job situations, the employer may take a tip credit but only for those hours the employee worked as a tipped employee.

In the above example, the tip credit may be taken for 40 hours. Assuming the employer takes the full tip credit (currently $3.02 per hour), this employee's cash wages for the week would be $166.30. ($287.10 - $120.80 in tip credit [40 hours x $3.02)] = $166.30)

How do I know if I must pay for employees' work clothes?

What constitutes a "uniform" lets employers know whether they are responsible for providing and maintaining an employee's work clothes or whether the employees can be required to pick up those costs. The U.S. Department of Labor (DOL) offers no hard-and-fast rules to help foodservice operators determine whether work clothes constitute a uniform, but in its Field Operations Handbook offers the following guidelines:

If an employer merely prescribes a general type of ordinary, basic street clothing employees should wear while working, and permits variations in details of dress, the garments chosen by the employees would not be considered uniforms.
On the other hand, where the employer does prescribe a specific type and style of clothing to be worn at workfor example, where a restaurant or hotel requires a tuxedo, or a skirt and blouse and jacket of a specific or distinctive style, color or qualitysuch clothing would be considered a uniform.
More obvious examples of clothes that the DOL considers uniforms include uniforms required to be worn by guards, by cleaning and culinary personnel, or by personnel in hospitals and nursing homes.
In response to inquiries, the DOL has issued opinion letters as to what constitutes a uniform. Those interpretations, however, are far from consistent. For example:

In one opinion letter dated July 28, 1978, one employer required dark blue trousers or skirt with a smock provided by the company; another specified that employees wear a white shirt and dark trousers. Neither employer specified the style, quality or type of material for the clothing except to say that blue jeans and dungarees were not permitted. The DOL ruled in both cases that the clothing did not constitute a uniform that had to be provided by the employer.
In another opinion letter dated February 23, 1979, the uniform in question consisted of all white itemstop, bottom, and shoesbut set no requirement in style, quality or material. A small front apron was provided and maintained by the employer. The DOL held that all items (top, bottom, shoes and apron) were unique uniform parts that must be provided by the employer. This decision was apparently based on the fact that most people do not have white tops, bottoms and shoes in their wardrobes.
As the examples illustrate, exactly what is and what is not a uniform is a gray area. However, as a general rule of thumb, the more specific the employer's requirements for employee apparel, the more likely it is that the DOL will consider the clothing a uniform.

Who is responsible for maintaining the uniforms?

Once an employer, or the DOL on the employer's behalf, decides that employee work clothes are indeed uniforms, federal law is crystal-clear: Employers who require minimum-wage employees to wear a uniform must pay for and maintain those uniforms. The employer may ask the minimum-wage employee to buy the uniform before beginning work, but the employer must then fully reimburse him or her no later than the next regular payday.

Even though an employee's tips may bring that employee's total earnings well above the minimum wage, the employer is not allowed to require the employee to use tips to pay for the uniform.

Workers who earn cash wages above the minimum wage may be charged for uniforms only to the extent that those charges do not reduce their wages below the required federal minimum.

Employees are responsible for cleaning and caring for work clothes that do not constitute a required uniform. However, if an employee's work clothes do constitute a uniform, the employer must pay for the cost of cleaning that uniform.

There is one exception: If the uniform is of wash-and-wear material that can be washed and tumbled dry with the family wash, and does not require daily washing, special commercial laundering, ironing or other special treatment (such as dry cleaning), the employer is not required to pay for its maintenance. Important note: This exception does not apply in all cases. Employers must pay laundering costs for wash-and-wear uniforms in cases where the employer furnishes the employee with only one uniform.

Can I deduct a security deposit for uniforms from an employee's wages? 

Another problem confronts foodservice employers: To ensure that minimum wage employees return their uniforms when they leave, may employers require an up-front security deposit (before the employee begins working), or may the employer deduct a security deposit from wages?

The answer is "no" for workers paid the minimum wage, including tipped workers who are paid the minimum wage. The DOL told the National Restaurant Association in an April 5, 1991, opinion letter that those deposits or deductions violate federal wage laws in cases where they reduce an employee's wage below the federal minimum wage. The Texas Payday Act further requires that any deduction from an employee's wages be agreed to in writing.

How do child labor laws apply to restaurants?

This is a summary of child labor laws under the Fair Labor Standards Act and the rules of the U.S. Department of Labor.

Employers should be aware of these basic guidelines:

1) A child must be 14 years or older to be employed under the regulations.

2) Youths 18 years or older may perform any job, whether hazardous or not, for unlimited hours.

3) Youths 16- and 17-years-old may perform any non-hazardous job for unlimited hours.

Hazardous jobs include:

a. Operating or repairing a motor vehicle;

b. Operating, repairing, oiling, setting up, adjusting or cleaning any power-driven metal forming, punching and shearing machine occupations including but not limited to all rolling machines, such as beading, straightening, corrugating, flanging or bending rolls.

c. Operating any machinery for slaughtering, processing or rendering meat packing services including but not limited to setting-up, adjusting, repairing, oiling, or cleaning meat-slicing machines or meat patty forming machines such as those in deli's.

d. Operating power-driven bakery machines including but not limited to assisting an operator, setting up, adjusting, repairing, oiling or cleaning any horizontal or vertical dough mixer, batter mixer, bread dividing, rounding or molding machine; dough brake, dough sheeter, combination bread slicing and wrapping machine; cake cutting band saw; and, cookie or cracker machine.

(i) However, a 16- or 17-year-old may operate the following bakery equipment:

Ingredient Preparation and Mixing
Flour-sifting machines, flour-blending machines, sack-cleaning machines;
Product Forming and Shaping
Roll-dividing machines, roll-making machines, batter-sealing machines, depositing machines, cookie or cracker machines, wafer machines, pretzel-stick machines, pie-dough-sealing machines, pie-crimping machines;
Finishing and Icing
Depositing machines, enrobing machines, spray machines, icing mixing machines;
Slicing and Wrapping
Roll slicing and wrapping machines, cake-wrapping machines, carton-packing and sealing machines;
Pan Washing
Spray-type pan washing machines and tumble-type pan washing machines.

4) Youths 14- and 15-years-old may work outside school hours in various non-manufacturing, non-mining, non-hazardous jobs under the following conditions:

a. no more than three hours on a school day;

b. no more than 18 hours in a school week;

c. no more than 8 hours on a non-school day;

d. no more than 40 hours in a non-school week;

e. work may not begin before 7 a.m., nor end after 7 p.m., except from June 1 through Labor Day when evening hours are extended to 9 p.m.;

f. 14- and 15-year-olds who are enrolled in an approved Work Experience and Career Exploration Program (WECEP) may be employed:

(i) during school hours;

(ii) for as many as 3 hours on school days;

(iii) for as many as 23 hours in school weeks; and,

(iv) in occupations otherwise prohibited for which a variation has been granted by DOL's Administrator of the Wage and Hour Division.

g. Permissible Work: 14- and 15-year-olds may:

(i) do office and clerical work (including office machines);

(ii) work in cashiering, selling, modeling, art work, work in advertising departments, window trimming and comparative shopping;

(iii) work in price marking and tagging by hand or by machine, assembling orders, packing and shelving;

(iv) work in bagging and carrying out customers' orders;

(v) do work involving running errands and deliveries by foot, bicycle and public transportation;

(vi) do cleanup work, including the use of vacuum cleaners and floor waxers and maintenance of grounds, but not including the use of power-driven mowers or cutters;

(vii) do kitchen work and other work involved in preparing and serving food and beverages, including the operation of machines and devices used in the performance of such work, such as, but not limited to, dishwashers, toasters, dumbwaiters, popcorn poppers, milkshake blenders and coffee grinders which are usually involved in fast-food work at a McDonald's, Burger King, etc. ... where the child may be seen by the public (does not apply if kitchen is enclosed or out of the public's view); and,

(viii) do work involving the cleaning of vegetables and fruits and wrapping, sealing, labeling, weighing, pricing and stocking goods when performed in areas physically separate from areas where meat is prepared for sale and outside freezers or meat coolers.

h. Work Restrictions: 14- and 15-year-olds may not:

(i) work in or about boiler or engine rooms;

(ii) work in connection with the maintenance or repair of the establishment, machines or equipment;

(iii) perform outside window washing that involves working from window sills or perform any work requiring the use of ladders, scaffolds or their substitutes;

(iv) cook (except at soda fountains, lunch counters, snack bars or cafeteria serving counters) or bake;

(v) engage in occupations which involve operating, setting up, adjusting, cleaning, oiling or repairing power-driven food slicers or grinders, food choppers and cutters and bakery-type mixers;

(vi) work in freezers or meat coolers or perform any work in preparation of meats for sale (except wrapping, sealing, labeling, weighing, pricing and stocking when performed in other areas);

(vii) load or unload trucks, railroad cars or conveyors; or

(viii) engage in occupations in warehouses except office or clerical work.

EXEMPTIONS FROM THE CHILD LABOR LAW

The Child Labor Provisions do not apply to children under 16 years of age employed by their parents in occupations other than manufacturing or mining or occupations declared hazardous by the Secretary of State.