Restaurants employ large numbers of workers. The most recent statistics estimate that about 14 million employees are in the restaurant industry. That represents about 10% of the total workforce. With so many workers in the industry, what are some of the major workplace issues restaurants face?

Many restaurant workers do not command high wages and are often paid minimum wage. Accordingly, minimum wage law may be an important issue for many restaurant businesses. Minimum wage at the federal level has not increased for many years and is $7.50 per hour, while, on the other hand, minimum wage in California has increased dramatically in the last few years. In California, the present state minimum wage for employers who employ fewer than 26 employees is $11 per hour, and for employers with at least 26 employees, the minimum wage is $12 per hour. By 2023, the state minimum wage will increase to $15 per hour for all employers, not matter how many employees they have.

Tips help to offset low wages paid to many restaurant workers, and various state and federal laws regulate tips and tip distribution. Under the federal law, a certain portion of tips can be used to cover part of the employee’s wage. It is called a tip credit. The maximum tip credit is $5.12. In contrast, California does not allow tips to offset any portion of an employee’s minimum wage. In other words, under California law, all restaurant employers must pay their employees at least minimum wage, and the employees may keep tips on top of the wages they are paid. The combination of the minimum wage law and tip credit law in California has prompted some California elected official to discuss a possible minimum wage tip credit. Anecdotally, restaurant prices have appeared to increase as the minimum wage has increased. A tip credit could help to offset higher restaurant prices.

Under federal law, as explained above, an employer can credit up to $5.12 of tips toward minimum wage, but if the employer takes a tip credit, then only employees who typically receive tips may be included in a tip pool. Those employees often are called “front of the house” employees. In contrast, if an employer elects to not take a tip pool credit to cover a portion of the minimum wage, then the employer can require a tip pooling arrangement that allows “back of the house” employees to share in tips. “Front of the house” employees include wait staff, bussers, bartenders, etc. “Back of the house” employees include cooks, food preparers, dishwashers, etc. The federal tip pooling requirements about who may share tips appear to apply to California. Because California forbids tip credits to cover minimum wage, a restaurant may require tips to be shared with workers in both the front and back of the house.

In California, meal and rest periods can be a very concerning issue for restaurant owners. The federal law does not regulate meal and rest periods, so state regulations set the standards for them.

California employers must provide the opportunity for employees to take meal periods if they work a shift that is more than 5 hours long. So, if an employee works five hours and one minute, California law requires the employer to provide an opportunity to take a 30-minute uninterrupted, unpaid meal period. Accordingly, the employee would clock-out at the start of the meal period and then clock-in after completing the meal period. During that time the employee is free to leave the employer’s premises. If the employee takes a longer meal period, the employer may discipline the employee.

Wait staff employees may not want to take a meal period because they do not want to lose tips from customers they are serving. An employee is free to decide to forego a meal period, but that can lead to problems. If an employee, such as a waiter, decides one day to not take a meal period, and later gets terminated, the time records will show that the employee did not take a meal period. The employee may later claim that they were not given an opportunity to take a meal period. A tip pool arrangement may help to avoid this issue because it can incentivize wait staff to take meal periods rather than skip them to collect tips. Employers may also discipline employees who elect to not take meal periods.

California rest period regulations are similar to meal period regulations. An employee is entitled to a 10-minute, duty free meal period if the employee works a shift of at least three-and-a-half hours. Employees get a second rest period if they work more than a six-hour shift. The employee does not clock-out for rest periods because California law consider rest periods to be paid time worked. Thus, the time record shows the employee on the clock even when they are taking a rest period. A disgruntled employee may later say that they did not get a rest period. Employers might consider a tracking system to show that employees received rest periods. Employees may elect not to take a rest period, but proving that the employee freely decided to not take a rest period can be a problem.

S. Ward Heinrichs, Esq.
Employment Law Office of Ward Heinrichs
4565 Ruffner Street, Suite 207
San Diego, CA 92111
858-292-0792
(858) 408-7543 (fax)