There are often two sides to legal issues arising out of the restaurant industry, employee, and employer. The employee side can be considered the wild west of employment law because the service industry often follows its own rules federally and statewide. On the other hand, owning a business, such as a restaurant, falls under several types of laws, most importantly, business law.
How Do I Get Paid as a Server?
Pay and wages as a server can be pretty complicated. Servers generally earn their money from tips that customers leave at the end of the meal. But servers also earn a minimum hourly wage from their employers.
A service industry employer, like a restaurant owner, is required by the federal government to pay at least $2.13 per hour in direct wages in addition to what a server makes in tips. For example, Taylor works in a restaurant where the minimum wage is $2.13. If Taylor works five hours, he will make $10.65 in direct wages for the day. However, Taylor made $100 in tips on the same shift. Therefore, Taylor earned $110.65 for the day.
The complexity is this; the minimum wage is different for servers and employees of other industries. Additionally, if the combined direct wages and tips an employee earns does not meet the universal minimum wage of $7.25, the employer must pay the server the difference.
Think about Taylor; if he only makes $20 in tips for his five-hour shift, his daily wages would only be $30.65, making his hourly wages $6.13. This is below the minimum wage of $7.25. Therefore, the restaurant would still owe Taylor money.
It should be pointed out, even though the federal law enforces a minimum wage for servers, each state can require a higher minimum wage if they choose to do so. States such as New York, Arizona, and Nevada are just a few who require servers to be paid more than the federal minimum wage. In contrast, states like South Carolina, Kentucky, and New Mexico agree with the $2.13 minimum wage.
Do I Have to Share My Tips?
Employers can require tipped employees to participate in a tip pool or tip sharing. A tip pool collects all the tips servers make in one shift and divides it into equal shares for all tipped employees and restaurant support.
Tip sharing occurs when an employer collects a percentage of tips from servers to tip out the host, bartenders, bussers, and food runners, for the help they provide in the customer’s positive experience. Tip out only applies to the employees in the front of the house.
If someone works in the back of the house, or the kitchen, they cannot receive a share of these tips. Managers or supervisors who make an hourly wage may not be tipped out. Most importantly, the restaurant and its owners cannot be tipped out or keep any money a server has earned from tips.
What Licenses and Permits Do Restaurants Need to Open?
Starting a restaurant requires very specific licenses and permits regulated by both the federal government and the state where the restaurant is located. If a restaurant is running without proper documentation, this can result in fines and fees. If these fines and fees are not taken seriously, they could result in the restaurant’s permanent closure.
Here are only a few examples of what licenses and permits are required for a restaurant to open:
- Business Licenses give a business the approval to operate. The state usually distributes this. But, if a restaurant wants to sell alcohol, they need a state and federal business license.
- Food Service Licenses prove that a restaurant is following all regulations for food preparation, storage, and safety.
- Sign Permits allow a business owner to display a sign outside of the business.
- Building Health Permits show the restaurant is complying with sanitation regulations.
Optional licenses that restaurants often obtain are:
- Liquor Licenses allow a restaurant and bar to sell and serve alcohol. This is a highly regulated license, and a business may be subject to strict rules.
- Music Licenses allow restaurants to play music that is protected under copyright laws. If you want your restaurant to have live music, a live entertainment license is a separate license.
- Dumpster Placement Permits are another permit often passed over, but if your restaurant needs a dumpster for trash disposal, this is necessary.
Do I Need an Attorney for the Food Service Industry?
If you are a restaurant employee and feel that you are not being paid appropriate wages, you may want to speak to a local employment attorney. If you are a restaurant owner who wants to inquire about rules and regulations in owning and operating a business, you should consult with a local business attorney.