CULINTRO A Community for Restaurant Professionals

How To Protect Your Restaurant Recap

By Caolina Daza Carreño

Culintro-Panel Series
October 27, 2009
Carolyn Richmond and Will Regan, moderated by Josh Ozersky

“How To Protect Your Restaurant” Panel Series was brought by Culintro to the Museum of Arts & Design with a contentious and relevant topic: Plaintiffs, allegations, and labor lawsuits faced by New York City’s restaurants. Ozersky, moderator of the panel, opened the discussion between Richmond, restaurant lawyer, and Regan from 3Sixty Hospitality, by portraying the impact that the current economic crisis is having on the restaurant industry and in a worrying prompting mood asked: “What’s going on, why such hazard for restaurateurs?” Bringing such issues to the table triggered the audience to understand the importance of enforcing New York City State Department of Labor (DOL) laws in their establishments.

The discussion was essentially focused on the common restaurant violations: “overtime wages, tips, service charges, and sexual harassment”, as well as the speculation caused by blogs and social networking cases. Richmond took on and clearly explained how the DOL laws have been in place since the late 1970’s and “designed for the manufacturing industry”, but have been ignored by many, and yet unregulated by the DOL. Unfortunately, as Richmond stated “Today the restaurant industry is their target, added to attorneys’ lucrative profits with plaintiffs’ class actions”; thus, Regan referred to these as “Low-hanging fruits” easy to undertake.

Getting into more details, Richmond explained the issues with the overtime pay of “exempt” versus “nonexempt” employees. The first of many problems found in restaurants is the mistaken classification of employees. On the one hand, exempt employees or “agents of the owners” are executive professionals that serve to supervise and can make decisions (rare exemptions are chefs), who are not entitled to overtime pay, and on the other hand, are time nonexempt hourly paid employees. Such improper categorizations have resulted in time shavings, in which managers freely adjust employees’ overtime hours and don’t keep the record for such changes; consequently, they face the claim by employees not being properly paid. Hence, some of the recommendations brought by both panelists were straightforward: “owners are 100% liable”; it is their responsibility to mandate the proper time keeping with all evidence of time adjustments.

Restaurateurs are leaving aside the importance of differentiating between who must get a salary versus an hourly wage. Due to the nature of the business’ intensity and time pressure, the Back-of-the- House (BOH) is commonly conformist with their pay and accept the routinely abuses of improper overtime retributions. Consequently, the DOL has been very active in targeting these situations; for instance, many restaurants are holding accountable payroll for such actions, but the true of the matter is that “owners are 100% liable”. The law sets the minimum wage for hourly employees at roughly $7.25/hr and $15.00/hr for the overtime, and for tipped employees at $2.60/hr (plus the ideal $4.65 in tips that adds up to minimum wage) and $8.25 for the overtime. Richmond suggested, “Get employees to sign and acknowledge the adjustment with management; maintain accurate reports”, but Regan strictly recommended, “Mandate compliance for employees punctually clocking in and out.”

Secondly, they touched upon the issue of “tip sharing” and “tip pulling”. Ozersky curiously questioned, “So, why are tips being divided, if a server is a good one he/she should get a good tip and if not a bad tip?” Richmond was brief and explained DOL’s strict “labor law”, which prohibits the house from touching employees’ tips: “Servers are not 100% responsible for the service to diners, but also bussers, runners, bartenders, baristas, etc…” Thus, she added some remarks about the historical transitioning in fine dining to create a “team pull” atmosphere to serve better the diners by allowing employers to mandate “tip sharing”. In addition, she clearly stated the illegality of any “tip pulling” by managers, and the importance of strictly categorizing who is eligible for tips. Basically, any employee that interacts with the dining room such as servers, runners, bussers, and baristas, amongst others, must be included in the pull, as opposed to a manager, dishwasher, etc. Thus, “owners are 100% liable”, especially when dealing with governmental taxes and have all the freedom to fire any employee at any time, especially if one does not comply with the regulations of properly reporting tips. Thirdly, the panelists were briefer in presenting: “service charges” and “sexual harassment”. They explained how “service charges” entitlements are not being clearly explained to customers, especially if gratuity is included. Richmond explained, “Gratuity is pre-taxed and discretionary to the customer thus any service charge must go the servers or team, not to the house”. Therefore, operators are free to charge whatever is in their interests, but must clearly state if such charges are for administrative or gratuity purposes.

And lastly, “sexual harassment” was presented as an evil threat in this tough industry where alcohol, late night shifts, and young employees are involved. In order for one to be 100% safe from any dangers, “owners who are 100% liable”, must prohibit having any dating and/or relationships taking place in the same establishment between employees. Richmond recommended having a record that states how to proceed if “any verbal, non-verbal, or physical harassment is present in the work environment”. Added to these issues, Ozersky brought up the issue of discrimination when hiring employees, “So what if managers want to only hire good looking people?” Richmond was straightforward about having proper job hiring requirements and pointed out that gender and age are the most common discriminatory categories in NYC. Regan jumped in and said: “Never ask for a photo, and please keep every job application received”. And lastly, Richmond explained her speculation on issues dealing with restaurants’ blogs and social networking for marketing purposes to save Public Relation costs, and the importance of “Training and prohibiting managers of policing employees.”

Ozersky opened the floor for Q&A after a very instructive 1-hour long session about the common legal hazards faced by the restaurant industry. Many within the audience took advantage of the valuable knowledge of these panelists and questioned about “runners expediting food at night, handicapped hiring, unpaid stages, pay periods, and meal allowances”, amongst other relevant topics that made this panel a very educational and beneficial one, especially when many are at risk of not surviving these new litigious waves. The audience included not only owners, but also operators, managers, servers, chefs, and students that gathered together and got more informed about what truly is going on. Culintro dedicated this whole Panel Series to “Providing an insightful way for restaurateurs and operators to understand potential risks that could ultimately destroy their business.”

More than a passionate Chef & Food Critic, Carolina is an advocate for food initiatives aimed at caring for our bodies, while achieving environmental sustainability. Carolina writes articles when her love for a recipe reaches the high peaks of a restaurant’s ambiance, its environmental standards, and politics that affect food systems.