New regs causing stir in restaurant biz

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An amendment to the Fair Labor Standards Act penned less than a month ago carries a stiff penalty for restaurant owners that fail to comply by the May 5 deadline.

While all employers are required by law to pay their employees at least the federal minimum wage — set at $7.25 per hour — employers of staff that earns tips in addition to wages can claim a credit allowing them to pay those employees as little as $2.13 per hour, provided the employees make more than $30 per month in tips and receive enough tips to bring their effective hourly wage to $7.25.

Under current standards, employers can implement a tip credit without notifying employees.

But that’s about to change.

The new standards would require all employers claiming a tip credit to first give their tipped employees advance notice they plan to take a tip credit on their wages. The notice must also state that the amount the employer is claiming as a tip credit cannot exceed the difference between the minimum wage and the actual wage paid by the employer. In addition, all tips would now be the sole property of the employee, except where a valid tip-pooling arrangement is in place. Even that measure, however, has seen some changes, as only employees who customarily receive tips, such as servers, bus staff and bartenders, may continue to receive them. Kitchen staff and maître d’s, for example, can no longer receive a portion of tips as was customary under tip-pooling arrangements.

Lee Schreter, a shareholder with national labor and employment law firm Littler Mendelson, in Melville, said the main problem with these new regulations has less to do with the regulations themselves and more to do with how the U.S. Department of Labor is handling them. She noted that these new regulations were penned only 30 days ago and the department has done little to inform employers of the changes.

“In 2004, the Department of Labor issued some new regulations for salaried, exempt employees,” Schreter said. “[It] spent a lot of time letting people know these new regulations were going into effect and had a lot of resources available to businesses large and small. Last time around, [the Department of Labor] gave them six months to get into compliance. Thirty days isn’t a long enough time, especially when you consider how many [restaurants] are going to be affected, and how many are small mom-and-pop places that are already busy with typical day-to-day work.

“There’s a real push by the Department of Labor to ensure employers are giving proper notice to employees, but [the department] isn’t doing the same thing to let the employers know that they have to do this,” Schreter added.

And some within the industry feel the restaurant business has been unfairly targeted.

“They always attack this industry for something,” said Mario Saccente, executive vice president of the Long Island chapter of the New York State Restaurant Association. “They feel this industry preys upon its employees, which isn’t true at all.”

Saccente said he’s been letting his members know via phone calls, faxes and newsletters of the new regulations.

“I’m no expert on the legal part of this,” he added, “but we still want to be proactive and let [restaurants] know it’s coming so they can be in compliance.”

A spokesperson for the Department of Labor admitted it did not provide as much notice of the new regulations as it had in the past.

“The department did not publicize this final rule as much as some other final rules … because we believe these changes to be more ministerial than changes contained in other final rules,” said Elizabeth Alexander, a spokeswoman for the U.S. Department of Labor’s Wage and Hour Division. “We have reached out to stakeholders such as the restaurant association on aspects that may impact specific communities. [We] believe 30 days is a sufficient period of time for employers to be in compliance with current statutory provisions.”

Gabriella Volpe, payroll manager of La Volpe and the adjoining Anton Pizzeria in Center Moriches, said she only knew about the changes because the two eateries employ a professional payroll company, something many smaller dining establishments can’t afford.

“We have a great company that does payroll for us, and they were the ones who actually let us know [about the new regulations],” Volpe said. “They’re actually even having a conference about it I’m going to on May 3. That really helps with small businesses like ours.”

Those who aren’t in compliance by the May 5 deadline could be subject to a penalty of up to six years worth of back wages for all tipped employees, Schreter said.

The Department of Labor has brought in a number of investigators to make sure the new regulations are being enforced, Schreter added.