Employees are entitled to certain rights and protections, such as a minimum wage, child labor protections, and overtime pay, and it is the responsibility of the restaurant operator to ensure that hours are tracked and paid out properly. Some cities have taken this a step further to pass Fair Workweek (FWW) regulations that seek to create a better work-life balance for restaurant workers.
Understanding your requirements as an employer is essential to avoiding wage theft and other labor law violations that could threaten the stability of the business. In this blog, we’ll review the scheduling, time, and attendance regulations at the federal, state, and local level as well as review common elements of FWW policies.
Understanding Wage Theft
Failure to pay workers the wages to which they are entitled is known as wage theft. It is not always malicious and can take many forms. Employers unaware of the regulations can easily commit wage theft on accident or as a result of poor recordkeeping.
Wage Theft Examples:
- Failure to pay minimum wage.
- Failure to pay or properly calculate overtime premiums or Fair Workweek premiums
- Failure to pay for all hours worked – referred to as “off the clock” work
- Misclassification of workers as “Exempt” or “Independent Contractors” to avoid paying overtime and other benefits
- Failure to distribute tips earned
- Withholding final wages from terminated employees
- Adjusting time records for unpaid meal breaks that are not taken or failing to provide breaks as required
- Taking improper deductions from paychecks
Fair Labor Standards Act and Other Wage Laws
U.S. wage and hour laws are guided by the Fair Labor Standards Act (FLSA) as enforced by the Wage and Hour Division of the U.S.
Department of Labor (DOL), which was designed to protect workers from unfair labor practices. Federal regulations are also enforced by several other agencies, including the Equal Employment Opportunity Commission (EEOC), Occupational Safety and Health Administration (OSHA), and the Employee Benefits Security Administration as well as the Internal Revenue Service (IRS) and state and local taxing agencies. These agencies cover other areas in the employee lifecycle.
The FLSA primarily includes provisions for:
- Setting a federal minimum wage
- Child labor standards
- Overtime pay
- Employer recordkeeping requirements
The FLSA does not presently require any of the following:
- Vacation, holiday, severance, or sick pay
- Meal or rest periods
- Pay raises or benefits (except for Affordable Care Act requirements)
- Premium pay for holidays, weekends, or night work
- Limits to the number of hours or days employees (excluding minors) may be required to work
- Discharge notices, reasons for discharge, or immediate payment of final pay to terminated employees
If a city, county, or state enacts a law that is different from the federal standard, the local law will prevail if it is either more restrictive (such as the Fair Workweek scheduling rules) or pays higher wages or premiums (such as California daily overtime). In addition, if an organization has a collective bargaining agreement (Union) the rules of the agreement need to be considered and applied.
Following are some illustrative highlights of the most common scheduling and time and attendance statutes.
Minimum Wage, Overtime, And Premium Pay
Minimum Wage
The Federal minimum wage, established by the Fair Labor Standards Act, is $7.25 per hour. This rate has been in effect since July 24, 2009. The FLSA ensures that all covered, non-exempt workers are entitled to at least this minimum wage for all hours worked. For employees working in tipped jobs (servers, bartenders etc.) the FLSA allows for a cash wage of $2.13 per hour if the weekly tips earned bring the employee’s earnings up to at least $7.25 per hour.
If there is a local wage (state, county, city, region, airport, industry, or union) that is higher than the federal rate, the local rate will prevail. Local minimum wage rates typically increase annually and at various renewal dates throughout the year.
- There are over 150 local minimum wage rates across the U.S., including more than 50 in California, eight in Washington state, and differing rates in NY depending on location and industry.
- The amount of tipped cash wage also differs in most of these locations.
- Only 14 states follow the FLSA minimum wage requirements.
- Eight states require full minimum wage and do not allow for a reduced amount for tipped employees:
- Alaska
- California
- Minnesota
- Montana
- Nevada
- Oregon
- Washington
- The FLSA and many states allow for a subminimum wage rate to be paid under certain conditions, including youth and/or training rates. Because of the competitive nature in the hospitality industry, these are rarely used.
Federal Overtime
The Federal Overtime Pay rule is the FLSA requirement that non-exempt employees be paid a premium of 50% (known as time-and-a-half) for all hours worked in excess of 40 in a workweek. Each employer establishes a 168-hour workweek and 24-hour workday that fits their operations and business needs. While it seems that this calculation would be simple, there are several factors and alternatives to consider:
- Income for overtime calculation must include:
- Hourly wages earned, including the full minimum wage for tipped employees
- Non-discretionary bonus pay, which may need to be applied across multiple workweeks (i.e., $200 for upselling the most lemonade in the month of June)
- Service charges included in pay that are not tips. Mandatory gratuities stated on menus or applied to large groups are not tips and may not satisfy the tip credit. They are reported as regular wages.
- Other pay that might include meetings, training, travel time, waiting time, commissions, or prizes
- Hours worked across the workweek cutoff must be counted as worked in two separate weeks, even if in the same shift. For example, if the workweek ends at midnight on Saturday night and an employee works a shift from 8pm Saturday to 6am Sunday, only the hours from 8pm to 12am will be counted toward the first week’s overtime; the hours from 12am to 6am will count toward the second week’s total.
- Calculating the rate of pay for the premium:
- Blended Rate or Weighted Average: This is used if an employee worked at more than one pay rate during the week or has any of the additional items included above. An average hourly rate needs to be calculated to determine the overtime rate.
- The FLSA allows an alternate option to use the rate of pay for the job at the time the overtime was worked.
- Salaried employees might be eligible for overtime pay:
- Any non-exempt employee paid a salary is eligible for overtime. There are a few different options for determining the hourly rate for the premium calculation that an employer may use.
- Any employee with a salary below a certain threshold (federal standard is currently $35,568 and eight cities or states have higher rates including up to $83,200 for CA fast food and $77,968 in WA).
- Paid rest breaks or meal breaks where an employee is required to stay on premises and provide any amount of work (even if only a few minutes) must be paid time. This is considered working time and contributes to the counting of hours toward overtime.
- The FLSA allows for exemption from overtime pay under certain conditions. “Commissioned” employees, including retail/restaurants where employees are paid a “commission” that might include service charges for banquets or events, may be exempt from overtime if certain conditions are met. These conditions include a base hourly pay rate of at least 1.5 times the local minimum wage for the full workweek and more than half the total earnings are from commissions. This rule is referred to as the 7(i) exemption after the code section in the FLSA.
- There is a long list of employees exempt from federal overtime including: executive, administrative, professional employees, outside sales, certain computer professionals, and many more. See the FLSA Digital Reference Guide for more information.
State Overtime
Several States have overtime rules that provide additional premiums. A sample of these include:
The states do not require the “pyramiding” of overtime pay if a work period falls in both daily and weekly overtime. In these cases, the employee is eligible for the highest rate of premium.
Other states and cities with special overtime premiums include:
- Alaska
- California, various city hotels
- Connecticut, various city hotels
- Kentucky, various city hotels
In certain circumstances, employers may opt to use a 4/10-hour workday and/or an 80-hour per two-week schedule for determining overtime premiums. And, if an employer is covered by a collective bargaining agreement or has its own policies for pay, the agreements may require more favorable overtime provisions for employees.
Other Pay/Premium Pay
There are several other types of pay/premium pay based on schedules or hours worked that include:
- Minimum Shift aka Short Shift or Reporting Time Pay in Tucson AZ, CA, CT, DC, NH, NJ, NY, OR, RI: If an employee’s schedule is canceled or cut short or an employee is scheduled for or called in for a short shift, these cities and states require a premium to be paid to the employee to partially make up for the missed work hours. As always, there are exceptions which may include a regularly scheduled short shift, such as an employee who comes in to clean for two hours every day, or an employee requested the shorter shift, arrived late, or chose to leave early. These exceptions should be documented in the permanent pay records.
- Split Shift Premium in CA, DC, NY: A split shift refers to a work schedule where an employee’s workday is divided into two or more separate periods of work with a substantial break in between (typically more than one hour). The employee is not paid for the time during the gap but is entitled to a premium for working a split shift. Employers need to monitor the reason an employee may have a gap during the day to determine if it is an employer-scheduled split shift that requires premium pay, or an employee requested a long break for personal reasons or returned late from an unpaid meal break that does not require the premium.
- Spread of Hours in NY: If an employee’s full workday, from the time of clock-in to the time of clock-out, spans more than 10 hours, they are entitled to Spread of Hours premium.
- Shift Differential Pay: This is not required by the FLSA or any states but may be a company pay policy. It typically provides additional pay (e.g, extra $2.00 per hour) for working specified time or shifts such as between 1am and 6am.
- Holiday Premium Pay: This is not required by the FLSA and only in a few instances in some states in retail. Many employers provide premiums for working on holidays, which requires setting up clearly documented pay rules and holiday calendars.
- Sleep Time Pay (not typical in Hospitality): This may be required in certain industries based on the description of the job, requirements to be on duty, and the amount of time the employee is authorized for sleep. Sleep time pay during a long shift may be at a different pay rate.
- On Call Pay: An employee who is required to remain on call on the employer’s premises is considered working while “on call.” An employee who is required to remain on call at home or who is allowed to leave a message where they can be reached is not working (in most cases) while on call. Additional constraints on the employee’s freedom could require this time to be compensated.
- Waiting Time: Consideration of waiting time as time worked depends upon circumstances. For example, an employee waiting for customers to arrive after prepping the restaurant for opening or waiting at their desk waiting for an assignment is considered working. This time is known as “engaged to work,” even if an employee is allowed to check their phone or read a book.
- Travel Time: This may be considered hours worked depending on the circumstances. Typically, commuting from home to work is not considered work time, but time spent traveling to a seminar or extra travel time to work at a different location may be compensable.
Child Labor Laws (AKA Minor Work Rules or Youth Employment)
The FLSA has very specific rules regarding the employment of minors, including hazardous jobs they may not perform, maximum hours that may be worked daily and weekly, limitations on early morning and late-night shifts, prohibiting work during school hours and school weeks, and documenting work permits.
To maximize compliance with child labor laws, employers must be certain to collect and monitor the following information for each employee under 18. Note that two employees attending the same school might have different school calendars, so care needs to be taken to review schedules with every employee.
- Date of birth
- Written age certificate or proof of age
- Authorization from parent or guardian and/or school authorities (required by some states)
- Detailed school calendar indicating days that there is no class and days when there might be late start or early release
- Schedule of hours that school is in session for each school day (i.e., is school out for the day at 1pm or 3pm?)
- Written documentation of any special status for a minor (exemptions, work study program, etc.)
Almost half the states have some minor work rules that are more restrictive than the federal standard. For states with more lax restrictions, they are required to follow the federal rules.
The FLSA and most states have several exemptions to these work restrictions that may include:
- The minor has graduated from high school or obtained a GED.
- The minor qualifies for a work-study program as part of the school curriculum.
- The minor is emancipated, married, is a parent, or has other specified economic needs.
Meal and Rest Breaks
While the Federal FLSA does not require any meal or rest breaks for adults or minors, it does stipulate that if breaks are provided, they must be paid and considered time worked if a break is 20 minutes or shorter. Breaks of 30 minutes or longer need not be considered time worked or paid if the employee is completely relieved from work during the break.
37 states have statutory meal and rest break requirements, and many have separate, more restrictive rules for minors. In addition, many have requirements that if a meal break falls short of 30 minutes, even if by just a few seconds or a minute, the full 30 minutes is considered as hours worked and
must be paid in full and considered as time worked for overtime premiums. In these instances, the employer has violated the requirement for an uninterrupted meal break and could be susceptible to penalties.
In rare instances and under certain conditions (e.g, only one employee is on duty) employees may take their meal breaks while on duty and eat a meal during the time or stay at their station to answer calls, but again this is considered time worked and must be paid. Some states have provisions allowing employees to waive meal breaks. It is very important that the waivers are “in writing” to be available as documentation in the event of an audit or employment claim.
Examples of a few of the more complex rules are below:
California Meal Break
- California requires a 30-minute meal break for any employee working more than 5 hours. The break must start no later than the beginning of the fifth hour, and a second break that must start before completing 10 hours of work.
- Employees who are not authorized and permitted to take their breaks are entitled to meal break penalty pay of 1 hour’s pay.
- There are provisions allowing employees to waive some meal breaks (if the shift is shorter than 6 hours or waive a second meal break if the shift is shorter than 12 hours). The meal waivers must still be taken before the fifth and tenth hour of work respectively.
- Employers must take care to carefully document these waivers.
California Rest Break
California also requires 10-minute paid rest breaks for each 4 hours (or major fraction of 4 hours) worked. These may not be waived, and employees are entitled to rest break penalty pay of 1 hour’s pay if they are not provided.
New York Meal Break
New York also has complex meal break rules that depend on both the length of the shift and the time the shift starts and/or ends.
- A shift of greater than 6 hours that starts before 11:00am and ends after 2:00pm is entitled to a meal break of 30 minutes that must be taken between 11:00am and 1:30pm.
- There are similar rules for shifts starting between 1:00pm and 6:00am and for shifts longer than 8 hours that start before 11:00am and end after 7:00pm.
- There are no required paid rest breaks.
Illinois Meal and Rest Break
Illinois has different break requirements for employees 16 and older and for 14–15-year-olds. As defined by the FLSA, breaks of 20 minutes or shorter must be paid and counted as hours worked. Employers may always allow for or require longer unpaid meal periods.
Washington Meal and Rest Breaks
Washington state also mandates meal breaks at specified periods during the shift:
- For shifts over 5 hours, a first meal break must start after working at least 2 hours and completed before the end of the fifth hour.
- If the shift is over 11 hours, a second meal period must be completed before the employee works 5 consecutive hours.
- Washington allows employees 18 and older to waive the meal breaks if the employer mutually agrees.
Washington requires 10-minute rest breaks for each 4 hours of work, also to be taken at specified times. Employees may not waive these breaks.
Washington has separate meal break requirements for 14–15-year-old employees and for 16–17-year-old employees. These meal periods may not be waived.
Fair Workweek (AKA Predictive Scheduling)
Fair Workweek laws are designed to provide predictable and stable work schedules for employees, especially in industries such as retail and food service where scheduling can be inconsistent. Each city/state with Fair Workweek provisions have different criteria to determine which employers must abide by the rules. These laws include some combination of the following provisions:
- Good Faith Estimates (GFE): This refers to an employer’s obligation to provide an estimate of the number of hours an employee can expect to work, typically when the employee is first hired, returns from a leave of absence, or when a new schedule is being discussed. This estimate is meant to give employees a clear idea of their expected weekly schedule and helps reduce the unpredictability that can be a challenge in many industries. NYC requires a fixed “regular schedule” and Philadelphia requires updates based on a look-back of Good Faith Estimate compared to actual hours worked.
- Hiring by Need: To discourage employers from relying on last-minute scheduling changes or on-call employees, some FWW requirements mandate employers to make hiring decisions based on their actual need.
- Advanced Notice of Schedules: Employers are required to provide posted work schedules to employees 14 days in advance of the first day of a work schedule for the full week. For example, a schedule starting on Monday July 15th must be “posted” no later than midnight on the evening of June 30th.
- In Writing: The notice of work schedules is required to be provided in writing or through an accessible scheduling system, ensuring that employees have a clear record of their assigned shifts.
- Posting and Access: Schedules must often be posted in a place where employees can easily see them, and employers may need to provide access to schedules through digital systems or other means that employees can regularly check.
- Penalties for Non-Compliance: If an employer fails to provide the required advance notice, they may face penalties imposed by the departments of labor and may need to pay a premium to each employee for each scheduled shift not posted on time.
- Employee Request for Privacy: A few cities have provisions that under certain circumstances employees may request that their names be omitted from the posting schedule to maximize their personal privacy.
- Predictability Pay: Changes to posted schedule after the deadline may result in a premium payment to employees. To remain compliant, employers must have a solid, reportable workflow in place to capture employee consent for schedule changes including coding the reasons for the changes, documentation indicating that the employee received notice of a schedule change, and a clear understanding of the amount due for each change.
- Compensation for Changes: Generally, if an employer makes changes to an employee’s schedule after the posting deadline for the weekly schedule, the employee may be entitled to predictability pay. This includes additional pay for last-minute changes, including adding time/shifts, changed locations or dates, and reducing or cutting shifts.
- Pay Amounts: Set by local regulations, pay may be a fixed dollar amount, an hour’s pay, or a portion of time for hours missed if a shift is cut short or canceled.
- Exceptions: Each location has a definitive list of reasons why an employee may not be eligible for predictability pay. Lists typically include: employee-initiated changes such as shift swaps or calling out sick, weather or disaster-related closures of the business, or reduction of hours.
- Grace Period or Buffer: Most locations allow for minimal changes to schedules (10–20 minutes) that will not result in requiring consent or predictability pay. This allows for inadvertent early/late clocking of just a few minutes or an employer’s request to stay just a few minutes late.
- Right to Decline: In most instances, employees have the right to decline any additional hours or time added to their schedules. In other words, if a manager wants to add a shift to a schedule, they must notify the employee in advance and allow the employee to decline. In addition, if an employee is asked to “stay late,” they have the right to decline and to leave at the scheduled hour.
- Right to Rest AKA “Rest Between Shifts” or “Clopening”: This provision is designed to allow employees a minimum number of hours (ranging between 9–11) between shifts, typically overnight, before being required to clock back in for a new shift.
- Right to Decline and Consent: Employees always have a right to decline and, in some locations, must provide written consent before accepting or working these shifts. NYC is very strict and requires written consent before starting the shift or an additional $500 is due to employee in addition to the $100 right to rest premium.
- Compensation: If an employee works a shift that is within the required rest period (with or without consent), they will be entitled to “right to rest” compensation. Each location calculates the compensation based on statute in the form of premium pay of 25%–50% or a fixed dollar amount. Employees may not waive their right to right to rest provisions or premium pay.
- Access to Hours: Before recruiting externally for open positions on ongoing shifts, employers are required to offer the hours to current employees. Each statute is a bit different, but they typically require offering shifts to employees that are part time (does not create ongoing overtime), trained for the position (not required in NYC), and at the current location. Each statute has specific criteria for notifying current employees.
Other Scheduling Requirements
Day of Rest
Several States provide an opportunity for employees to have a weekly day of rest and/or to request not to be scheduled due to religious observance. It is important to have a clear understanding of each state’s requirements and clear documentation of each employee’s requests. Much of this can be accomplished by a robust availability application integrated into the scheduling process, so the scheduling manager has easy access to all employees’ restrictions and preferences.
Here are a few samples of Day of Rest requirements:
- Federal: Employers must make a reasonable effort to accommodate an employee’s sincerely held religious beliefs or practices, including observing a Sabbath or other holy days. Accommodations might include rescheduling shifts, allowing swaps with other employees, or granting unpaid leave.
- California: An employer may not cause an employee to work more than six out of every seven days. A day of rest is guaranteed for each workweek. However, periods of more than six consecutive days of work that stretch across more than one workweek are not necessarily prohibited. An employer must also provide reasonable accommodations to allow employees to observe a Sabbath or other religious holy days, reasonable time necessary for travel before and after a religious observance, and religious dress practice and religious grooming practice.
- Louisiana (Employees Under Age 18): Minors shall receive an eight-hour rest break at the end of each workday and before the commencement of the next day of work. This is similar to the Rest Between Shifts provision of Fair Workweek.
- New York: An employer must allow covered employees to have at least 24 consecutive hours of rest in any calendar week. Before operating on Sundays, an employer must designate a day of rest in each calendar week for each employee and notify each employee in advance of his or her designated day of rest.
Industry Specific Rules: Hotels
Several cities in California have statutes that apply to hotel employees, generally for staff that service guest rooms. Among other requirements, these employers have the following restrictions.
The employer must:
- Notify the employee of the square feet they are assigned to clean during a shift.
- Limit the number of square feet an employee can be required to clean in an 8-hour day.
- Limit the number of “special assignment” rooms an employee can be assigned to clean in one day unless the employee is paid a premium of double time.
- Not require or permit an employee to work over 10 hours in a workday without written consent from the employee. The employee may decline to work over 10 hours without any adverse actions on the part of the employer.
Scheduling Tools for Automated Compliance
Automated scheduling tools help operators create, finalize, distribute, and modify shift schedules while ensuring compliance with labor laws. These tools come with built-in compliance guardrails that prevent operators from creating non-compliant schedules or violating Fair Workweek laws. The software is configured to adhere to relevant state, local, and federal regulations during deployment.
For example, Fair Workweek laws require employees to have a set number of hours of rest between shifts. If an operator attempts to schedule a shift that violates this requirement, the system alerts them and prevents the schedule from being finalized until the issue is resolved. Additionally, the system ensures compliance with Child Labor laws by restricting scheduling for minors in accordance with legal guidelines.
In addition to ensuring compliance, automated scheduling tools offer other significant benefits. AI-powered demand forecasting helps improve scheduling accuracy, reducing overstaffing and saving businesses on labor costs. Businesses using scheduling tools, like HotSchedules, have reported saving up to 5% on labor costs and cutting scheduling time by up to 50%.
Compliance Violation Story: $2M in Citations for Child Labor and Nonpayment of Wages
In 2024, the office of Attorney General Andrea Joy Campbell in Massachusetts issued more than $2M in citations again Northeast Foods LLC. The organization operates dozens of Burger King franchises throughout the state. The AG office determined that the franchise operator violated child labor law regulations by scheduling minors to work over nine-hours in a day. Furthermore, the AG determined that the franchise failed to pay workers minimum wage and maintain timely payment.
The investigation began after an employee reported nonpayment of wages, and the AG’s office uncovered that nearly 2,000 employees were affected by the alleged violations. This combination of payroll violations and child labor violations accumulated into a hefty fine.
Download the Definitive Guide to Compliance for Restaurants
Beyond Fair Workweek, there are a multitude of other scheduling, payment, and rest requirements to meet when operating your restaurant. It’s a lot to remember as is, but there is more still. Employee benefits, payroll processes, recruiting, and more all have their own federal and state requirements to abide by.
Avoid violations and penalties with a robust understanding of your regulatory obligations. Download the Definitive Guide to Compliance for Restaurants today.
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