Tim and Nina Zagat, co-founders of Zagat Survey, in their December 13 letter to the New York Times titled “Adding Fairness to the Tip” raise important issues as to why New York City restaurants are being sued by their workers and what the future holds for the industry. The Zagats rhetorically ask what is behind the onslaught of lawsuits and suggest that it is mainly due to a confusing hodge-podge of laws and regulations. But there is more to the story.
While there is an extraordinarily complicated set of laws governing the pay of restaurant employees, there are also other reasons for the rampant labor law violations in the restaurant industry. First, there is the cash element to the business, making it easier (and more tempting) to short-change workers. Second, many illegal immigrants populate the kitchens and dining rooms of restaurants. Some employers mistakenly believe that the illegal status of their employees exempts them from complying with the law or, at the very least, will make them too scared to speak up. Third, the restaurant industry is competitive and unforgiving to owners who cannot maintain service and quality. Unfortunately, some restaurants seek to increase their profit margins by denying employees the compensation they are due.
While it might lead to greater efficiency, the Zagats’ plea that a special judicial board be created to hear pending and future cases is unrealistic. The rights of restaurant workers are vindicated by private attorneys who file lawsuits under the Fair Labor Standards Act (FLSA) and the New York Labor Law. Congress is not about to change the FLSA, and by passing the Wage Theft Protection Act, the New York legislature has recently increased the penalties to restaurants who violate the law.
The assistance restaurants need, however, is not from Congress or the New York legislature, but rather from their attorneys and accountants. Indeed, the Zagats overlook that there are a few basic rules that restaurants need to know to keep themselves mostly out of trouble. Here is a short list of the top five ways New York restaurants can stay in the kitchen and out of court:
1. Keep track of and pay for all hours worked (Warning: Do not pay shift pay or salary.)
2. Pay overtime for all hours worked after 40 in a week (Warning: Only take the “tip credit” once when overtime is paid.)
3. The entire charge to a customer for a tip, gratuity, or service charge should be distributed to the waitstaff (Warning: If the house keeps part of a service charge, let the customer know.)
4. Keep managers and kitchen employees out of the tip pool (Warning: If an employee manages the restaurant or does not interact with customers in the dining room, they should not share in the tips.)
5. Pay “spread of hours pay” (Warning: New York law requires that certain employees be paid an extra hour of pay at minimum wage (currently $7.25) each day their workday spans more than 10 hours.)
So, how do we rate Tim and Nina Zagat’s letter to the Times? From the waiterpay.com perspective, they get low marks for the premise that the wave of restaurant litigation raises an issue of “fairness” when the real issue is that restaurants simply need to know and comply with the law. Nonetheless, the Zagats still get a 30 for raising awareness about these important issues for restaurant owners and workers in New York.