The Federal Department of Labor (DOL) is targeting restaurants in NM for audits.

In this webinar for restaurants, we will be speaking to a DOL Wage and Hour Investigator about typical restaurant violations and how to avoid them.

It is crucial that you know what the laws require and ensure you are following the letter of the law. You need to know what they are looking for in their audits.

I know of one DOL investigation in Albuquerque that ended in $85,000 in fines and back pay.

Do not miss this webinar!


Click here for the Slide Deck from the webinar.

Tip Pooling Fact Sheet https://www.dol.gov/newsroom/releases/whd/whd20180409

Exempt Employee Fact Sheet https://www.dol.gov/whd/regs/compliance/hrg.htm#8

NM FAQ’s https://www.dws.state.nm.us/Portals/0/DM/LaborRelations/Labor_Law_FAQs.pdf

Hours Worked Fact Sheet https://www.dol.gov/whd/regs/compliance/whdfs22.htm

PAID  Program https://www.dol.gov/whd/paid/

Some of the most common FLSA violations include:

• Paying employees fixed salaries without regard to how many hours they worked, leading to overtime violations when they worked more than 40 hours in a week.

• Improperly calculating overtime for tipped employees.

Paying overtime in cash, off-the-books, at “straight time” rates.

Deducting the cost of uniforms, breakages, or shortages from workers’ pay; reducing their hourly wages below the federal minimum wage.

Failing to keep accurate and thorough records of employees’ wages and hours worked.

• Failing to pay for all hours worked.

Paying servers tips only.

Requiring tipped employees to surrender tips to an illegal tip pool.

• Requiring minor aged employees to work outside of the hours allowed by the law.

NMRA has been sounding the alarm about DOL audits for several years. With DOL investigators already in our state, this is a critical time to take stock of your employment practices to make sure you aren’t vulnerable to DOL audits, or even worse, lawsuits filed by private attorneys representing employees.

The US Department of Labor has plans to focus audits on restaurants in 2019. They are conducting an initiative to assist in bringing restaurants into compliance with the Fair Labor Standards Act (FSLA). They are also promoting a self-audit program that allows employers to correct violations without litigation. Here is a glimpse of that PAID (Payroll Audit Independent Determination )program.

Here is the November 2018 webinar where we will have a presentation from the US Department of Labor Wage and Hour Division to explain this self-audit program. They will also discuss where they see restaurants getting into trouble and paying big fines, penalties and back-wages with the federal law.

At times, employers may be the first to uncover violations of overtime or minimum wage laws. Many employers prefer to correct their mistakes and voluntarily pay their employees the wages they are owed. Fearing full-scale federal investigations or costly litigation, employers may choose not to address the violations at all—resulting in losses to employees, employers, and taxpayers.

The U.S. Department of Labor’s Wage and Hour Division (WHD) has announced a new nationwide pilot, the Payroll Audit Independent Determination (PAID) program, which facilitates resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). The program’s primary objectives are to resolve such claims quickly and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

Disclaimer

This presentation is intended as general information only and does not carry the force of legal opinion. The Department of Labor is providing  this information as a public service. This information and related materials are presented to give the public access  to information on Department of Labor programs. You should be aware that, while we try to keep the information timely and accurate, there will often be a delay between official publications of the materials and the modifications of these pages. Therefore, we make no express or implied guarantees. The Federal Register and the Code of Federal Regulations  remain the official source for regulatory information published by the Department of Labor. We will make every effort to keep this information current and to correct errors brought to our attention.

Here is an article from the US DOL that explains the program in more detail:

The Department of Labor’s New Payroll Audit Independent Determination (PAID) Program

Helping more employees receive back wages—faster

The U.S. Department of Labor’s Wage and Hour Division (WHD) has announced a new nationwide pilot, the Payroll Audit Independent Determination (PAID) program, which facilitates resolution of potential overtime and minimum wage violations under the Fair Labor Standards Act (FLSA). The program’s primary objectives are to resolve such claims quickly and without litigation, to improve employers’ compliance with overtime and minimum wage obligations, and to ensure that more employees receive the back wages they are owed—faster.

At times, employers may be the first to uncover violations of overtime or minimum wage laws. Many employers prefer to correct their mistakes and voluntarily pay their employees the wages they are owed. Fearing full-scale federal investigations or costly litigation, employers may choose not to address the violations at all—resulting in losses to employees, employers, and taxpayers.

Purpose of the program:

The primary goals of the PAID program are identifying and correcting non-compliant practices so employees receive 100 percent of their back wages due. To that end, the PAID program will require employers to review their pay practices, accept compliance assistance, and correct the practices that led to the errors. WHD expects that many more employers will self-report and, as a result, that many more employees will be paid more quickly.

How it works:

Under the PAID program, employers are encouraged to conduct audits and, if they discover overtime or minimum wage violations, to share this information with WHD, work with us in good faith to correct their mistakes, and provide due compensation to their employees in an expedited manner.

WHD will oversee the PAID program and, in each case, will evaluate the amount of wages due and supervise employers’ payments to employees. Employees will receive 100 percent of the back wages paid, without having to pay litigation expenses, attorneys’ fees, or other costs. They will also receive their back wages quickly—unlike in litigation, which can take years.

Employers that voluntarily self-report and work with the Department in good faith to take corrective action under the PAID program will not be subject to liquidated damages or civil money penalties as a condition to finalize settlements. Without exception, employers that participate in the program will be required to pay 100 percent of the back wages due for the violations they seek to resolve.

Safeguards to prevent abuse:

The PAID program includes the following safeguards to protect employees and prevent abuse of the program:

  • Employers may not participate in the program if WHD determines they are acting in bad faith or are under investigation for the potential violations at issue.
  • Self-reporting is a requirement to participate—the PAID program is not available to settle ongoing lawsuits.
  • Repeat violators cannot use the PAID program to resolve recurring violations.
  • Settlements will be limited to the violations that employers self-report, and employees will not be required to accept settlements if they disagree with them.

How to participate in the program:

All FLSA-covered employers are eligible to participate in the PAID program. To do so, employers must first review the program requirements and compliance assistance materials available on our PAID website, then audit their compensation practices for potentially non-compliant practices. If the employer discovers any non-compliant practices or believes its compensation practices may be lawful but wishes to proactively resolve any potential claims, the employer must then contact WHD to discuss the issues for which it seeks resolution. Unless WHD denies the employer’s request to participate in the program at the outset, WHD will inform the employer of the manner in which the employer must submit required information.

WHD will then evaluate the information provided and contact the employer to discuss next steps, including the collection of any other information necessary for WHD to assess the back wages due for the identified violations. After WHD assesses the back wages due, it will issue a summary of unpaid wages. WHD will also issue forms describing the settlement terms for each employee, which employees may sign to receive payment. Employers are responsible for issuing prompt payment; WHD will not distribute the back wages. Employers must pay all back wages due by the end of the next full pay period after receiving the summary of unpaid wages and provide proof of payment to WHD expeditiously.

Employers are required to follow specific protocols at each stage of program participation. Please visit the PAID website for the most current and complete program information.

WHD will implement the PAID pilot program nationwide for approximately six months, after which it will carefully evaluate the program and consider future options. WHD encourages employers to audit their compensation practices and consider participating in the PAID program. This will be a win for employees, a win for employers, and a win for taxpayers. More information about the program is available at www.dol.gov/whd/paid/.

Chat questions from the webinar:

https://www.dol.gov/whd/paid/

  1. Enterprise coverage is where I am still confused. How can I get clarification for our specific situation?
    1. $500,000, 1 employee, uses an item that came across state lines
  2. We will try to answer if you can give a quick description or you can contact us directly via email and we will get it clarified.  dining@nmrestaurants.org.
  3. What if uniform is voluntary? Is it okay to deduct then?
    1. Dress code (jeans, black shirt/shoes) Attainable anywhere vs Uniform (logo’d) shirt/apron, cannot be deducted if paid Min or less.
  4. Awesome thank you – we keep getting conflicting information and I want to make sure we are doing things the correct way.
  5. On deductions what if we give the employee an advance on his paycheck we agreed to allow him to do small payments via payroll deduction and then he fails a random drug test are we allowed to deduct what he still owes from his last paycheck? (He also has to child support deductions which I know come first)
    1. If agreed upon as a loan & loan repayments would be ok.
  6. I would like to request more information on Hours worked. Linked on web page

https://www.dol.gov/whd/regs/compliance/whdfs22.htm That is the Fact Sheet #22

  1. Does a 20 min or less short rest break cover even if they leave the property?
    1. yes
  2. Is that only if they are working 6+ hours, or does it matter?
    1. No bearing
  3. Can you take out a 30 min break automatically without them clocking in/out? assuming that they are actually taking the break.
    1. Bad idea. Common issue.
  4. Remember he is talking about FEDERAL labor standards.  NM may have different requirements.
  5. Here is a link to the NM FAQ’s https://www.dws.state.nm.us/Portals/0/DM/LaborRelations/Labor_Law_FAQs.pdf
  6. Can an employee (tipped) request you take their uniform out of their check?
    1.  Unless they have enough uniforms for a week without washing.
  7. What was the formula he mentioned again?
  8. Which formula?
  9. He had one early for figuring cash wages, is that what you were looking for?
  10. As for FOH vs BOH tips – we have a “Chef’s Table” in the BOH area that we only pay our BOH staff out from those tips – is that acceptable?
    1. Must have interaction with the customer!
  11. The one to make sure your paying your employees at or above minimum wage.
  12. I think he just answered that.  Are the BOH ‘performing”, then yes.
  13. Got that – thanks. But! We typically pay out 8 cooks or so for that which I know aren’t all “performing” so should they only be going to the chef/cook who is performing then?
    1. We can ask him at the end.
  14. Thanks – sorry, one more thing to add to that scenarios. The cooks that are “performing,” are they added to the entire tip pool or is the tip from that table enough? Thanks again!
  15. Where does QSR restaurants fall into tip pooling? Our employees are paid above state and federal wages, but we tip pool with all jobs (cooks, cashiers, dining room attendant and bartenders).
  16. Can you pay a support person (Front of the House) less than minimum and give them tip outs to get to the min rate?
  17. If a tipped employee does not have customers to service for more than 20% of their work schedule (like during opening or closing) does that violate tip credit rules? In other words does that employee become disqualified for tip credits?
  18. https://www.dol.gov/newsroom/releases/whd/whd20180409 Tip Pooling
  19. https://www.dol.gov/whd/regs/compliance/hrg.htm#8 Exempt employees

Here are the remaining chat questions from the webinar… 

1. We typically pay out 8 cooks or so for that which I know aren’t all “performing” so should they only be going to the chef/cook who is performing then? The cooks that are “performing,” are they added to the entire tip pool or is the tip from that table enough?

  1. Answer:If your restaurant takes a “tip credit” then you should not share or pool tips with back-of-the-house staff (cooks, chefs, dishwashers). For performing cooks you can share tips only from tables where they “performed”.Tip Credit CalculationApplicable Minimum Wage – Cash Wage Paid = Tip Credit

    Employer may claim “tip credit” only if:

    • Employees are informed of tip credit allowance and amount of wage claimed as “tip credit”
    • Employer documents sufficient tips received to bring total wage to at least minimum wage
    • Tips are retained by employee, not shared with employer or other employees except in valid tip pooling arrangement.

    An employer who pays a cash wage less than the Federal MW to a “customarily tipped” worker is essentially claiming a tip credit. Guidance about enforcement of the tip credit rules https://www.dol.gov/whd/FieldBulletins/fab2018_3.htm

2.Where does QSR restaurants fall in regards to tip pooling? Our employees are paid above state and federal wages, but we tip pool with all jobs (cooks, cashiers, dining room attendant and bartenders).

  1. Answer:See the above guidance. Employers who pay the full FLSA minimum wage are no longer prohibited from allowing employees who are not customarily and regularly tipped—such as cooks and dishwashers—to participate in tip pools. The Act prohibits managers and supervisors from participating in tip pools. https://www.dol.gov/whd/FieldBulletins/fab2018_3.htm

3. Can you pay a support person (Front of the House) less than minimum and give them tip outs to get to the minimum wage rate?

Answer:

Yes, any employee who regularly faces and directly serves the public can participate in the tip pool.

4. If a tipped employee does not have customers to service for more than 20% of their work schedule (like during opening or closing) does that violate tip credit rules? In other words does that employee become disqualified for tip credits?

Answer:
The DOL has now reissued the 2009 Opinion Letter (designated as FLSA2018-27). That opinion letter states, contrary to the 20% Rule, “We do not intend to place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties and all other requirements of the Act are met.” The Opinion Letter also provides guidance regarding which duties are related to tipped work and which are not, stating, “We also believe that guidance is necessary for an employer to determine on the front end which duties are related and unrelated to a tip-producing occupation so that it can take necessary steps to comply with the Act.” See this Jackson/Lewis article https://www.jacksonlewis.com/publication/labor-department-abandons-8020-tip-credit-rule-relief-restaurant-hospitality-industries

The dividing line between “dual job” and “related duties” is not always clear, however.

To give enforcement guidance on this issue, we issued FOH §30d00(e), which states: Reg 531.56(e) permits the taking of the tip credit for time spent in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips (i.e. maintenance and preparatory or closing activities).

For example a waiter/waitress, who spends some time cleaning and setting table, making coffee, and occasionally washing dishes or glasses may continue to be engaged in a tipped occupation even though these duties are not tip producing, provided such duties are incidental to the regular duties of the server (waiter/waitress) and are generally assigned to the servers.

However, where the facts indicate that specific employees are routinely assigned to maintenance or that tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit maybe taken for the time spent in such duties. per https://www.dol.gov/whd/opinion/FLSA/2018/2018_11_08_27_FLSA.pdf

5. Can I add a service charge to tables over 6 people? How do I treat that money for distribution?

Answer:
https://www.nmrestaurants.org/service-charge-vs-tip/

Service Charge:

  • Any charge that is automatically applied to a bill and the customer doesn’t have the ability to choose whether to pay it or not.
  • MUST COLLECT SALES TAX – This is where a lot of restaurants get into trouble with the Department of Revenue and IRS audits.
  • Shall be considered revenue to the business.
  • The business may keep all or a portion of a service charge, but must be accounted for like normal payroll would be.
  • Money given to an employee from a service charge cannot count toward a tip credit.

Tips:

  • Are freely given to the server by the customer.
  • Are the employee’s money! Outside of a legal tip pool the business has no control of that money.
  • All tips must be reported by the server to the establishment for income reporting purposes.
  • DO NOT COLLECT SALES TAX ON TIPS!

Guidance about enforcement of the tip credit rules

https://www.dol.gov/whd/FieldBulletins/fab2018_3.htm

https://www.dol.gov/whd/opinion/FLSA/2018/2018_11_08_27_FLSA.pdf

Handy reference to FSLA – https://www.dol.gov/whd/regs/compliance/wh1282.pdf

The tip pooling and distribution rules have changed:

https://www.dol.gov/newsroom/releases/whd/whd20180409 Tip Pooling

Field Operations Handbook https://www.dol.gov/whd/foh/

Calculating Tipped Overtime 2 methods:

Exercise: Tipped Employee Exercise: Tipped Employee

Alternate Method from Previous Slide

Employer Paid

Hourly Wage: $2.13

 

Tip Credit Claim: $5.12

 

Hours worked: 50

 

Regular Rate: $7.25

 

Additional Half-Time Rate: $3.63

 

50H x $7.25 = $362.50

10H x $3.63 = $36.30

 

Total Due:

$362.50 + $36.30 = $398.80

 

Tip Credit:

$5.12 x 50 = $256.00Total Cash

 

Wage Due:

$398.80 – $256.00 = $142.80

 

Employer Paid

Hourly Wage: $2.13

 

Tip Credit Claim: $5.12

 

Hours worked: 50

 

Regular Rate: $7.25

 

Half-Time Rate: $3.63

 

OT Rate: $5.76 ($2.13 + $3.63)

 

40H x $2.13 = $85.20

$10H x $5.76 = $57.60

 

 

 

 

 

Total Cash Wage Due:

$85.20 + $57.60 = $142.80