Are you paying your restaurant staff properly? Common employment standards, mistakes, and questions [Part 2: United States]

5/17/16 7:00 AM Natalie Appleton


Overtime. Breaks. Minimum wage.

For restaurant operators, finding the clauses and calculations to determine these ever-changing location-specific factors can be dizzying.  To help answer some of those questions, we've created this two-part blog series to point you in the right direction!

If you have operations in the Great White North, be sure to read Are You Paying Your Restaurant Staff Properly? Common Employment Standards Mistakes & Questions: Part 1—Canada.  For those of you with restaurants in the US, read on.

To get a better understanding of the common wage and hour mistakes American restaurant operators struggle with, we turned to our friends at the Restaurant HR Group, which serves a mean mix of payroll, benefits and leadership training.

In this post, Carrie Luxem, Restaurant HR Group president and CEO, shares the payroll questions her team gets the most from the restaurant industry.

1. Staff or independent contractor?

As restaurant operators, you have more than just your chefs and servers to think about when it comes to payroll. There might be a guy you have in to wash the windows and take away empties, a woman who does the early morning cleaning, a plumber on speed dial.

When you hire someone, the Fair Labor Standards Act (FLSA, regulated by the Department of Labor and providing state-specific guidelines) says your employee needs to be classified: employee or independent contractor. 

“The classification options can be confusing,” says Luxem, adding filing staff as contractors when they’re not is one of the most common mistakes restaurant operators make.

How do you know which way to classify your new hire? The Restaurant HR Group points to the IRS and some of the factors it uses to determine if “an employer-employee relationship exists…”

  1. The right to discharge the individual
  2. The mode of payment
  3. The supplying of tools and/or equipment
  4. The belief of the parties as to the existence of an employer-employee relationship; 
  5. The length of employment

The HR Group provided a handy link to a few different scenarios to help you determine the right classification for your staff and situation.

2. Exempt or non-exempt?


Getting this step correct is critical for restaurant operators, says Luxem. That’s because non-exempt employees are eligible for overtime.

“The general difference between the two classifications is that non-exempt employees are usually hourly while exempt employees are salaried.” 

Here it is again:         Hourly = non-exempt (usually)

                                   Salaried = exempt (usually)

As the Restaurant HR Group points out, the FSLA states to be considered exempt, an employee must be:

  • Paid on a salary basis, and
  • Paid at least $23,600 per year ($455/week), and
  • Perform exempt job duties

But what if you have employees in your restaurant who do a bit of both? Let’s say your bartender is on salary, but also washes the windows on Sunday mornings at an hourly rate.

Luxem says the answer lies in the ‘primary duties’ test:

“…Set apart the employees’ primary duties from their collateral tasks. The classification of their primary duties determines their overall classification as either exempt or non-exempt employee.”

3. Too much or not enough overtime?

The Restaurant HR Group says given the confusion about which staff are exempt or non-exempt, restaurant operators are often find out they’re either: 

  1. Paying overtime to employees who should be exempt, or
  2. Not paying overtime to non-exempt employees 

“Either way, it’s put you in a less than ideal position by opening you up to possible litigation, back pay, and unnecessarily stressful employee relations.”

The US federal government is also moving forward with proposed changes to who is
eligible for overtime. For restaurants, the new overtime rules could mean managers
would qualify for overtime, which could equate to big costs for restaurant operators.
However, it looks like there could be ways to mitigate the impact.

Stay tuned to Ameego as we follow the updates!

4. To break or not to break?


Contending with split shifts, late starts, late nights and more can make it particularly “tricky” for restaurant operators to get a handle on the rules around meal breaks and rest breaks.

The Restaurant HR Group, which operates in dozens of US states, uses these guidelines for the meal breaks of an employee on a 7.5-hour shift:

  • Employee is entitled to a 20-minute meal break
  • That meal break should take place within five hours of starting that shift
  • You decide whether meal breaks are paid or unpaid

Luxem has another piece of advice for owners and managers: “Besides meal periods, rest periods (or breaks) should be documented.”

5. What is minimum wage again? 

For restaurant owners and managers with stores in several provinces and/or states—most of which have seen minimum wage increases in recent months, and all of which have a different rate—it can be hard to keep track of how much you need to be paying front and back-of-house staff.

In the US, minimum wage is different even city to city because it’s influenced by federal, state and municipal regulations. 

US federal minimum wage:           $7.25

State variations:                               $7.25-10.50

Operators have to abide by the higher minimum wage if the municipal rate were higher than the federal rate.

If that’s not confusing enough, Restaurant HR reminds operators there are separate minimum wages for tipped and non-tipped employees.

“Minimum wage can be challenging,” says Luxem. “…All of these federal and state guidelines can still be difficult to translate to your own restaurant and employees. And since failure to comply can result in hefty fines, penalties and legal fees, this is one area you really can’t afford to go wrong.”

To help ensure you're paying your restaurant staff properly, don't forget to download your free copy of our staff signout template available here:


Topics: Payroll Export, Improving Restaurant Profit