November 4, 2016 |

Labor Matters

By Daniel P. Smith

Labor issues that can trip up restaurant operators ­— and how to avoid them


Push labor laws as a restaurant operator and the pushback can be ferocious.

In August, news broke that nearly 10,000 Chipotle workers were suing the company for unpaid wages. The class-action lawsuit alleges that the burrito-peddling chain routinely required hourly employees to punch out and then continue working until dismissal from management.

While Chipotle has denied wrongdoing in various media accounts, the headline-grabbing revelations certainly cut against the Denver-based company’s cherished positioning as a socially conscious brand invested in more than profits, including the well being of its employees.

For restaurant operators around the country, the Chipotle snafu underscores the importance of adhering to labor guidelines, especially given that a massive lawsuit or mounting government fines can threaten a restaurant’s very existence as well as its standing with employees and consumers.

“It just takes one disgruntled employee or someone in the know to find out and the restaurant opens itself to a potential world of hurt,” says Evie Jeang, founder of the California-based Ideal Legal Group.

For restaurants, labor is often the biggest expense ­— and an ever-rising burden given regulations from the Affordable Care Act to increasing minimum wages that continue to challenge operational sustainability. In working to keep labor costs in check and avoid triggering certain labor thresholds, some restaurant operators might push regulatory boundaries, live in perceived gray areas or overlook regulations to save a buck – or five. Restaurants, for example, might:

  • Compel an employee to work off the clock, the precise issue at the core of the Chipotle lawsuit.
  • Require an employee to close one night and open the next, a practice called “clopening” that landed Starbucks some negative press.
  • Hire undocumented workers or fail to fully vet a prospective employee’s eligibility to work.
  • Pay employees in cash to avoid taxes.
  • Restrict employees from taking breaks to maximize labor hours.
  • Neglect necessary certifications such as ServSafe training.

Whether the labor misstep is the result of improper training, negligent managers, pressure to meet performance targets or even an honest,
innocent mistake, restaurant operators have a responsibility — and, many would argue, an ethical responsibility — to be compliant and do right by their employees. Here’s how pizzeria operators can stay on the positive side of the law:

The more you know…

Though a seemingly daunting exercise, Jeang urges restaurant leadership to educate themselves on constantly evolving labor laws by attending local small business seminars or seeking information from the National Restaurant Association or a state association.

“Education is the best way to protect yourself,” Jeang says. “Many times, operators aren’t trying to rip off people or be unethical, but truly do not know the law.”

Kevin Bray, director of customer success at Deputy, a leading global workforce management solution, points to overtime as one notable example. The popular definition of overtime, for instance, is working more than 40 hours in a given week. Depending on local or state guidelines, however, overtime can apply when staff work more than eight consecutive hours or more than six days during a week.

“You cannot just manage to 40 hours a week and need to know what constitutes overtime where you are,” Bray says.

Leverage technology

labor2As humans are prone to error and lapses in judgment, particularly so when faced with stress-inducing operational burdens, Bray suggests removing humans from the equation and automating the process as much as possible.

Workforce management technology like Deputy, for instance, alerts management when an employee is nearing certain work-hour thresholds or can exclude a manager from scheduling an employee beyond established norms. It can also ensure employees are paid for every hour they work, while delivering accuracy to employers with capabilities such as facial recognition.

“The right technology makes life easier while also helping protect companies from common issues like fraud or, worse, accusations of mismanagement of workers’ time that could lead to a lawsuit,” says James Walker, president of the Americas at Deputy.

The right documentation

Reliable documentation helps mitigate litigation.

When hiring, require completed W-4 and I-9 forms as well as two pieces of identification. Then, create an employee personnel file that includes these forms as well as copies of the identification the new employee supplied.

“Have a system of check and balances to make sure people are eligible to work,” Bray says.

An employee handbook, meanwhile, is another tangible ally, particularly so when it states policies around breaks, meals, overtime, certifications and other pertinent employment issues. Employees should sign and acknowledge receipt of the handbook.

“This helps to keep boundaries from being blurred,” Jeang says.


Transparency is another powerful tool to minimize trouble.

Employees, Bray says, should always have access to their timesheet and know what’s being sent to payroll, while employers, Jeang adds, should be connected to their accountant to ensure taxes are being addressed as necessary.

With an employee handbook clearly defining store policies, operators can then reinforce key messages in plain view. For example, signage in an
employee common area that reminds employees to take a break or a schedule detailing when employees might have a meal break.

Chicago-based writer  Daniel P. Smith has covered business issues and best practices for a variety of trade publications, newspapers, and magazines.


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