3 Common Compliance Mistakes That Restaurants Make
Owning and operating a restaurant comes with many responsibilities and challenges. It’s easy to get wrapped up in the day-to-day operations of your business and lose track of the multitude of laws and regulations you’re expected to comply with.
In order to avoid any ethical and legal issues from arising and threatening your business, it’s important to make sure you fully understand and adhere to all relevant laws and requirements.
Here are some of the most common compliance mistakes restaurant owners and managers make, along with some tips on how to avoid them:
1. Miscalculating overtime eligibility
In the US, some restaurant employees are entitled to overtime pay for the extra hours they work, while others are not. There’s a common misconception that salaried employees are never entitled to overtime. However, this is not always the case. Whether or not an employee is eligible to receive overtime pay depends on more than just his or her status as a salaried or hourly employee.
Under the Fair Labor Standards Act (FLSA), employers must classify employees as either “exempt” or “nonexempt.” Employers are required by law to pay nonexempt employees overtime, but are not required to compensate exempt employees for additional hours worked. To be considered exempt, an employee must generally:
- Be paid at least $23,600 per year
- Be paid on a salary basis
- Perform exempt job duties, which include supervising and managing others
For example when deciding if an employee is exempt or nonexempt, it’s important to distinguish between a “manager” and a “manager on duty.” A manager is responsible for overseeing other employees, while a manager on duty is solely responsible for administrative managerial tasks.
Some Canadian provinces and American states also have overtime rules that differ from Federal rules. For example, Ontario only observes weekly overtime (40+ hours a week) as per the Federal law but British Columbia and California observes both daily overtime (8+ hours a day) and weekly overtime. Whichever amount of hours is higher is what is paid to the employee!
2. Poor record keeping
Keeping inadequate or incomplete records can lead to a number of potential compliance issues and put you at risk as an employer.
In Canada, payroll audits are tedious. And if you're unable to produce the appropriate documents when requested by the Canadian Revenue Agency, the process is delayed. As a result, any potential fines can be hefty!
In the US, disorganized time and attendance records and payroll data can cause you to misclassify employees and/or fail to identify full-time employees.
Under the Affordable Care Act (ACA), you are required to provide health care coverage to all full-time employees if you have more than 50 on staff. There’s a common misconception that an employee must work 40 hours per week to be considered full-time. However, the ACA considers any employee who works at least 30 hours per week (or 130 hours per month) to be full-time.
You want to make sure you’re keeping accurate and complete records each and every month in order to ensure you’re complying with all relevant federal, state, and local laws. Not only will this help you avoid unnecessary risk, but it will also make staffing and other management decisions easier.
3. Not adhering to employee break regulations
It’s important to make sure you and your employees are aware of all relevant break laws. This will allow your employees to be aware and help you adhere to them. The restaurant business poses particular challenges when it comes to employee breaks, due to the fast-paced team environment and continuous interaction between employees and customers.
In the US, each state has its own rules and regulations about employee breaks, so it’s important to research and understand your local laws. Restaurants operating in multiple states may need to have different policies at different locations in order to comply with each state’s requirements.
It’s crucial that managers not only understand the break laws themselves, but also that they clearly communicate them to all staff members. It’s a good idea to have a written policy that specifies how many breaks employees should take, how long each break should be, and when these breaks should be taken. This not only mitigates risk for you, but also ensures your employees are not overworked.
While it can sometimes be a struggle to keep track of all the legal and regulatory requirements that apply to your business, it’s well worth the extra time and effort. You’re better off making sure all the necessary boxes are checked now, as opposed to dealing with unforeseen legal and ethical issues in the future that could have been avoided. With a little research and planning, you can make sure to avoid these common compliance mistakes and focus on growing your business and brand.