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Hospitality Industry Employment Law Concerns
Posted March 2014 by S. Ward Heinrichs
Hospitality Industry Employment Law Concerns
San Diego California is a coveted vacation spot. It has great weather all year long and beautiful scenery. Our downtown is not a massive metropolis but boasts amazing architecture and the latest amenities. In short, San Diego is a destination for tourists, out of town guests, and for those who just want to get away from it all. Consequently, we have many businesses in the hospitality, tourist, and service industries.
Businesses in those industries face many of the same practical concerns and legal issues that any other business faces. Of course, they also have their own special concerns.
One issue of great concern to all industries in California is the new minimum wage law that passed last year. It raises the minimum wage to $9.00 per hour on July 1 of this year. The same law increases the minimum wage to $10.00 per hour starting on January 1, 2016. As many of you know, the Obama administration is pushing a national minimum wage increase of $10.10 per hour. Even in San Diego, a committee of our city government recently recommended that San Diego put a proposal on November’s ballot to raise the local minimum. Apparently, the committee suggested $13.00 per hour was an appropriate local minimum wage. Rest assured that all employers in California will need to cope with an increase in minimum wage, and many businesses will see even larger increases to the minimum wage than are now in place.
Many people in San Diego work in bars, pubs, coffee shops, restaurants, and other businesses where employees receive tips as part of their compensation. Generally, California law forbids the employer from taking or sharing in tips (Labor Code §351), and employers must track all tips that they collect for employees (Labor Code §353). Employer mandated tip pooling is legal, but the house cannot share in the pooling arrangement. The tip pool must be fair and reasonable. Only those who are in the chain of service can be in the pool. For instance, an employer cannot require servers to include cooks and dishwashers in the pool.
Tips are taxable income. The IRS now requires all tips to be declared. When tips are shared, who must pay the tax?
Technically, all persons who receive tips or a share of the tips must report it as income. However, a common practice is for the employer to allocate the entire tip to the server who waits on the table. In that case, even when the server shares the tip, the server is the only person who pays tax on the entire tip. The employers records do not show any other employees in the service chain as persons who receive tips, even though they do in tip pooling arrangements. Presumably, they escape tax liability because the employer’s records do not show them collecting any tips. The server then unfairly pays tax on income that the server did not actually take home.
A new California law requires “cool down” periods when the temperature reaches 85 degrees.
The law only applies to outdoor work and only in the following industries: agriculture, construction, landscaping, oil and gas extraction, and transportation or delivery of agricultural products. The hospitality, tourist, and service industries should not be directly affected by the new law, even though employees in those industries may work under hot conditions. For instance, restaurant kitchens can trap heat and increase the risk of heat hazards. Likewise, some tourist industry employees may work outside under hot conditions. Still, we know of no direct regulation that requires a cool down period in those industries. Cal OSHA can still cite any business for unsafe conditions, including hazardously hot conditions.
S. Ward Heinrichs, Esq.
Employment Law Office of Ward Heinrichs
4565 Ruffner Street, Suite 207
San Diego, CA 92111
(858) 408-7543 (fax)
Employment Law Office of WARD HEINRICHS
4565 Ruffner St. Suite 207 San Diego 92111
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