The restaurant industry is one in which payroll compliance can be tricky. Perhaps the only other industry as difficult as food service in terms of payroll compliance is construction. Indeed, that’s why Dallas-based BenefitMall offers specialized payroll solutions for both. They believe their specialized solutions give customers the upper hand.

The question is, why is compliance so challenging for restaurants? The answer can be encapsulated in three words: turnover, tips, and classification. A Connecticut restaurant recently found that out when they were cited for multiple violations of the Fair Labor Standards Act (FLSA).

Not Paying Employees Properly

An OSHA report published in late October (2019) explains that East Hartford’s Nolita Ristorante failed to pay as many as 14 current and former employees correctly as a result of improper record-keeping and flat wages that didn’t take into account overtime hours. After investigating the offenses, the U.S. Department of Labor required the restaurant’s owners to pay more than $19,000 in back wages and liquidated damages.

The OSHA report does not say if failures by the restaurant’s owners were intentional or out of ignorance. In the end, it doesn’t much matter. The result of their actions was that 14 employees did not get paid every penny they earned until the government forced the issue.

Among the violations, OSHA noted the following:

  • Failure to Pay Minimum Wage – Minimum wage in Connecticut is subject to the federal level of $7.25 per hour. OSHA found that the restaurant failed to pay that amount when considering all of the hours that employees worked as compared to the actual amount paid.
  • Flat Wages for Some – Some employees, particularly dishwashers and servers, were paid flat wages rather than hourly. In essence, they received salaries regardless of the number of hours worked. Despite not being exempt, said employees did not receive overtime pay when earned.
  • Inadequate Record-Keeping – Federal regulations require employers to keep accurate records of time, attendance, and pay. OSHA found that the restaurant did not meet that requirement. Their poor record-keeping made it rather difficult to figure out exactly what was going on.

Again, OSHA does not say whether the violations were willful or committed in ignorance. The fact that no charges were pressed suggests that there was insufficient evidence to prove willful misconduct. At just over $19,000 in back wages and damages, it would seem the restaurant owners escaped what could have been a much harsher penalty.

Compliance is Not Voluntary

It is cases like this that remind restaurant owners how important compliance is. In the simplest possible terms, compliance is not voluntary. Federal and state authorities do not look kindly on employers who do not pay their workers every penny earned. And if an employer is found out of compliance, things can get ugly pretty quickly.

BenefitMall recommends a specialized payroll solution for restaurants. A payroll solution designed around the unique needs of restaurants should make compliance a lot easier. It can also reduce the risk of human error that would otherwise result in noncompliance without a restaurant owner’s knowledge.

The big lesson to be learned from all of this is that there really is no excuse for non-compliance the DOL will accept. Even restaurant owners, who have arguably the most complex payroll of all, have a legal obligation to understand the law and apply it correctly. Could this be why so many restaurants outsource payroll to third-party providers? You bet.

Constant changes in federal and state regulations make payroll increasingly more complex with every passing year. Sometimes it takes a payroll specialist to keep up.

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