Food Services Law

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 What Are Some Legal Issues in the Food Service Industry?

The food service industry encompasses a wide variety of business models from individually-owned coffee shops and taverns to large franchise establishments and everything in between. A business in the food service industry might encounter a number of legal issues involving conflicts with the following:

  • Food and beverage suppliers, 
  • Franchisor parent companies, 
  • Landlords, 
  • Building contractors;
  • Employees, including servers, hostesses, cooks or chefs, busboys and dishwashers;
  • State, county or municipal health inspectors; and 
  • Customers. 

One issue that should be of concern to all purveyors of food services is food safety. Some of the food safety issues that can arise are customer allergic reactions, food-borne illnesses, such as salmonella, food storage safety, keeping food free of contaminants, safe food handling routines and the like.

Another issue for the modern food service industry is food aggregators. Customers are becoming used to ordering food through websites and apps that promise delivery to their door. Restaurants and fast-food outlets enter into contracts with platforms to whom they pay a fee or commission for their sales and deliveries of their menu items. 

The platforms may approach restaurants with standard contracts. This is a moment when a food service would want to step back and seek the services of an experienced business contract lawyer to review the contract and make sure the service’s interests are adequately protected. 

How Do I Get Paid as a Server?

Servers in the restaurant industry typically earn a small hourly wage paid by their employer and also tips received from the diners they serve. Restaurant laws and regulations regarding server pay vary from state to state and even from city to city. 

The federal minimum wage, which applies if the city or state in which a server works is not different, is $2.13 per hour. This is the minimum that a restaurant employer must pay its servers. In some cities and states, the so-called “tipped minimum wage”, i.e. the minimum wage that is paid to workers who receive tips, has been raised.

Federal law requires that a restaurant server earn at least $2.13 an hour. In the event that their tips in addition to their hourly wage, does not add up to the standard minimum wage of $7.25 an hour, the restaurant employer must make up the difference, so the worker earns at least $7.25 an hour for any given shift.

In New York City, the minimum wage for fast-food service workers is $13.50. Servers in fast-food restaurants typically work behind counters and do not receive tips. The minimum wage for fast-food service workers in the rest of New York state is $11.75. 

The minimum wage for restaurant servers is $8.08 an hour in Colorado as of 2019. In Idaho, the minimum wage for restaurant servers is $3.35 an hour. In Alaska and California, there is no special tipped minimum wage. Servers in those states are paid the regular minimum wage of $9.89 and $11 an hour, respectively.

The U.S. Department of Labor has a table of information about tipped-minimum wages, both the federal standard and the tipped minimum is all U.S. states and territories. It is an excellent resource for restaurant servers and anyone else who needs information about the minimum wage for restaurant servers. State departments of labor can also be a valuable resource for both restaurant employers and employees about tipped and non-tipped minimum wage laws.

Do I Have to Share My Tips?

Servers in restaurants earn tips from diners in addition to their hourly wage. Restaurant tip policy for employees varies from restaurant to restaurant. Tips are collected and distributed among restaurant workers in a variety of ways, including the following:

  • Tip jar: In some informal restaurants, especially those where customers pay at a register rather than through the servers, there may a tip jar at the cash register where tips can be deposited; the tips are then distributed among servers and other employees;
  • Tip on the check: This is the most common method; a server presents a customer with a check with the total charge for the meal, and the customer adds a tip, either in cash if the check is paid in cash or by adding a tip for a credit-card payment; if the restaurant collects the tip through the cashier in the form of a credit-card payment, then the restaurant must transfer the tip to the server or to the common pool, if that is restaurant policy;
  • Large group gratuity: In some larger restaurants, if a large group is dining together, a gratuity, or tip, will be included in the bill. For example, many restaurants will add an 18% gratuity for groups of six or more, although this can vary from establishment to establishment.

In some restaurants, servers are required to add their tips to a pool that is shared among the servers equally or it might be shared with hostesses, busboys and dishwashers also. There is no one policy; each restaurant determines its own policy. It would be advisable for a server who depends on pay from tips to keep a record of hours worked and tips paid by customers to which the server is entitled.

What Licenses and Permits Do Restaurants Need to Open?

There are a number of licenses and permits that a restaurant must obtain to operate legally. An experienced food industry lawyer can be of great help and should be knowledgeable about the various types of licenses and permits and the processes for obtaining them. Among the licenses and certificates that are needed are the following:

Licensing of business name: The licenses and permits that are necessary to open a restaurant start with the naming of the business. A person who wants to open a new restaurant must first select a name and then register it legally with the state in which the restaurant is located. The domain name for the restaurant’s website must also be purchased. 

Business structure: The owner or owners must then decide what kind of business structure to have, whether a sole proprietorship, partnership, limited liability company or a corporation. Or the restaurant may be a franchise operation and have a contract with the franchiser that determines naming and business structure.

Business license: The restaurant must also obtain a business license from the state where it is located. The U.S. Small Business Administration is a good source of information about state and local business license requirements. A good food industry or business lawyer should also be able to guide an owner through the business licensing process.

Certificate of Occupancy: A restaurant must pass an inspection in order to obtain a certificate of occupancy, certifying that it is safe to occupy and setting occupancy limits. The inspection should include plumbing, electrical system, fire safety and general building inspection.

Food Service License: A city or county health department will issue a food service license. The health department will visit a restaurant to ensure that it is in compliance with all restaurant food safety regulations. Even after a food service license is obtained, the health department will continue to regularly inspect a restaurant. If it fails an inspection, it risks losing its food service license, so it is advisable to pay attention to food safety regulations on a regular basis.

Employer Id Number: Next comes the Employer Identification Number from the IRS. This nine-digit number enables a business to file its taxes properly.

Employee Health Permit: A food handler’s permit, or employee health permit, is also required for a restaurant. This permit ensures that a restaurant’s staff members individually have completed obtained food safety certification and are educated about important regulations for food sanitation, storage, protection, and preparation. 

States differ in their requirements for food safety courses that are necessary to obtain a food safety certification. Again, a food industry lawyer should be familiar with requirements and how to satisfy them.

Alcohol, music, valet parking: If a restaurant wants to serve alcohol, offer live musical entertainment or valet parking, each of those services requires its own permit. Food trucks have their own licensing requirements. 

The licensing and permitting requirements for restaurants are complex; it can be a great help to enlist the services of an experienced business lawyer both for meeting requirements when starting a restaurant and for keeping up with continuing requirements and changes in laws and regulations.

Do I Need an Attorney for the Food Service Industry?

An experienced business lawyer can help both restaurant owners and restaurant employees in a number of ways. 

If you are a restaurant employee and feel that you are not being paid the wages you are owed, you may want to speak to a local employment attorney. If you are a restaurant owner who wants to inquire about rules and regulations for owning and operating a business, you should consult with an experienced  local business attorney.

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