Five Legal Matters Concerning Restaurant Owners in 2017

Regardless of where you fall on the political spectrum, it cannot be denied that the United States has elected a businessman as its president. In that sense alone, business owners may find themselves especially attuned to the seismic shifts in the economic landscape. Restaurant operators have very specific legal issues to keep an eye out for.

The five legal matters that should concern restaurant owners are:

Overtime

Last year, the U.S Department of Labor announced a rule that would dramatically alter who is exempt from the minimum wage and overtime pay protections of the Fair Labor Standards Act. The impact of this rule is that the annual salary threshold determining who qualifies for overtime pay under federal law would be doubled. In addition, millions more Americans would be eligible for overtime pay. Restaurants with middle management employees stand to be affected by this change.

This past November, a lawsuit filed by 21 states, alleging that the rule is unconstitutional, caused a federal judge in Texas to block the rule nationwide. The fact that the rule was introduced under the Obama administration does not bode well for its future in the Trump era. Trump’s original nominee for Secretary of Labor, fast-food executive Andrew Puzder, was a vocal opponent, but had to withdraw from consideration due to opposition from Senate Republicans. His replacement, Labor Secretary Anthony Acosta, has declined the position.

Minimum wage

The restaurant industry tends to be the first to come to mind when the topic of minimum wage is mentioned. Early in Trump’s campaign, there was mention of a federal minimum wage increase from $7.25 per hour to $10 per hour. It is more likely, however, that state and local legislatures will be making progress in this arena. Last August, Governor Chris Christie vetoed a bill that would have increased New Jersey’s minimum wage to $15 per hour by the year 2021. Proponents of the bill, however, are expected to place it on the ballot for voter approval this fall.

Health grades

The fact that health grades can make or break a restaurant may be nothing new, but standards and processes are always being revised. At the very least, a first-class establishment is expected to maintain an “A grade." This letter-grading system is usually included in a restaurant’s lease, possibly even its loan documents. This year, Los Angeles County began to enforce a new point deduction system. Many other cities and counties are expected to follow suit.

Tip pooling

A Department of Labor rule prohibiting restaurants from requiring wait staff to share tips with back-of-house employees may be seen as anti-business by the Trump administration. Basically, the rule has affected the bottom line for restaurants, not to mention the wages of kitchen workers who depend on their share of tip pools. Some restaurants have increased menu prices to offset their cost. Others have added a line to bills that allow the customer to tip the back of the house directly. In some cases, tips have been replaced all together with mandatory “service fees” that the service staff split among themselves.

So far, the rule has been upheld by the Ninth Circuit Court of Appeals and a petition is pending before the Supreme Court. However, the economic setbacks to the restaurant business are apparent causing many owners to rethink their approach to tipping. As long as the issue is pending, many restaurants have opted to keep tip pools despite running the risk of facing a federal investigation or private lawsuit.

Wage disparity

Along with California, New York and Massachusetts, New Jersey has significantly revised its laws on gender pay inequity. This indicates that, like minimum wage, issues of gender and race-based wage disparity will mostly be addressed at the state level. It has been largely observed that such issues are especially apparent in fine-dining restaurants. Claims that women are being steered toward lower-paying positions or that people of color are only employed as lower paid bussers, food runners and kitchen staff are being taken more seriously. Smart restaurant owners have already begun to develop strategies to address such claims and implement protocols for responding to wage disparity complaints.

In 2009, the federal government passed the Lilly Ledbetter Fair Pay Act, which enables an employee to file a complaint regarding unfair pay. If an employee has filed a complaint, or if you simply have legal questions regarding your business and its operation, please call to make an appointment.

Please be advised that this blog is for informational purposes only, is not legal advice and does not create an attorney-client relationship.