How Wage And Hour Laws Affect Catering Service Businesses
For the purpose of wage and hour classification, California includes employers that offer catering services in the public housekeeping industry. Other employers included in this category are restaurants, hotels, motels, other employers that offer rental living quarters, hospitals, privates schools, maintenance services and, of course, the public housekeeping industry. CE Smith Law Firm offers services and support to California employers in these industries.
As a California employer in this industry, here are some general, state-law requirements and protocols of which you must be aware:
Wage and hour orders: California employers are subject to the minimum requirements of the Federal Fair Labor Standards Act. But, California’s minimum wage and overtime requirements exceed federal standards. In addition, California policies concerning tipped employees varies considerably from federal law:
1. Applicable IWC order: Wage Order No. 5, which must be posted at the employer’s facility.
2. Split-shift, premium pay: When an employee works a split shift, one hour’s pay at the minimum wage must be paid in addition to the minimum wage for that workday, except when the employee resides at the place of employment. (Cal. Reg. Notice Register 84, No. 23, p. 776.)
3. Tips and tip pooling: Tipped income is the exclusive property of the tipped employee. Employers or their agents may not take tipped income nor credit tipped income against wages. California employers may not pay tipped employees a sub-minimum wage. In California, a reduction, directly or indirectly, of an employer’s minimum wage obligation by virtue of tips received by an employee is absolutely prohibited. However, subject to certain restrictions, employer-mandated tip pooling, for equitable distribution of tip income, is not prohibited. Requiring tipped employees to make a tip pool contribution of 5% to 15% of total tips received by an employee is reasonable and customary. One restriction on employer-mandated, tip pools is that “agents” of the employer, such as managers, leads, or anyone else who in any way supervises, directs or controls the acts of other employees, for any period of time, may not participate in the tip pool. Another restriction is that only employees who customarily receive tipped income by virtue of their position participate in the pool. An employer’s failure to abide by these restrictions has become fertile ground for class action litigation. As simply one example, in April 2008, Starbucks was ordered to repay California baristas $86.7 million plus interest because supervisors shared a portion of tips left in jars.
4. A compulsory, customer service charge imposed by a business upon a customer for services rendered is not a tip. Even if the employer chooses to distribute the service charge to its employees, it is still not a tip. It is not tip income because, by definition, it is not a gratuity where payment is left to the discretion of the customer. It is a mandatory charge imposed by a business, that can also use the income generated by the service charge any way that it chooses. It is not required to share any portion of this income with a tipped employee.
5. Because of the risk of litigation arising from employer tip policies, you are encouraged to contact CE Smith Law Firm to review your policies and procedures for tipped employees.
6. California overtime pay requirements: Unless a specified exemption applies, time worked in excess of eight hours in one day or in excess of 40 hours in a week or for the first eight hours of work on the seventh day must be paid at the rate of one and one-half times the employee’s regular rate of pay. Any work in excess of 12 hours in a single day or in excess of eight hours on the seventh day must be compensated at the rate of two times the employee’s regular, hourly rate of pay.
7. Other exemptions to overtime pay requirements: An employer who misclassifies an hourly paid employee as a salaried employee may inadvertently commit numerous violations of state and federal wage and hour laws. A legal review of such classifications is strongly recommended to avoid fines, penalties and other liability for misclassifications.
8. Meal and rest periods: An employer must provide the opportunity for an off-duty meal period of at least 30 minutes to every employee who works more than five hours daily, with a paid, 10-minute rest period for every four hours worked. This means, for example, that a full-time employee, who works eight hours per day, must have the opportunity for at least one, off-duty meal period and two, paid rest periods each day. The California Supreme Court recently granted review of the appellate court’s decision in the Brinker case. The appellate court in Brinker had previously ruled, in part, that employers must only offer such breaks to their employees, not ensure that such breaks are actually taken. Because of the Supreme Court’s grant of review, the Brinker decision has been depublished and is no longer valid. Employers may no longer rely on the Brinker decision to determine whether their meal and rest period policy complies with California law. Employers should contact CE Smith Law Firm for guidance and assistance on this issue.
9. Uniforms: When uniforms are required to be worn by the employer as a condition of employment, such uniforms shall be provided and maintained by the employer, at the employer’s expense. (8 CCR § 11050 9(A).)
Classifying workers as contractors vs. employees: California takes a dim view of employers who seek to classify their workers as contractors instead of employees. The state can and does prosecute employers who misclassify their employees as contractors in an effort to avoid tax withholding, or workers’ compensation insurance and the like. It can and does report such conduct to federal agencies for a separate investigation and can also issue a stop-work order that will shut your business down. It is absolutely essential that you obtain a legal review before implementing a business model that classifies workers as “independent contractors.”
Retention of personnel records and payroll records: Personnel records must be retained during employment and for two years after separation of employment. Generally, payroll records must be maintained for three years after date of creation. Payroll records include, of course, timecards and time records for each employee who is an hourly paid employee, together with records of all payroll deductions, gross pay and net pay to each employee. Time cards and time records should include not only all hours worked, but also meal periods. Authorized rest periods need not be recorded.
Prohibition against discrimination/harassment: For employers with five or more employees, California law prohibits employment discrimination on the basis of race, religion, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age or sexual orientation of any person. California has a general prohibition against language restrictions in the workplace, except for business necessity. For all employers with one or more employees, harassment for the same bases listed above is also prohibited. In California, any person who engages in sexual harassment in employment may be personally liable, which includes any employee, supervisor, officer, director or managing agent of a business.
Required supervisor training to prevent sexual harassment in employment: California requires every employer with 50 or more employees to provide its supervisors with two hours of interactive training every two years to prevent harassment in employment.
Pregnancy leave and family medical leave: California requires all employers to provide up to four months of pregnancy leave. Also, employers with 50 or more employees must provide up to 12 weeks of family care and medical leave within a 12-month period, to any employee with more than 12 months of service and with at least 1,250 hours of service within the previous 12-month period.
Union-targeted industry: This is an industry frequently targeted by the unions for organizing activity. To ensure that you remain union-free, please contact CE Smith Law Firm for further guidance and assistance.