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Notable Laws and Regulations Restaurant Managers and Owners Should Be Aware Of

Payroll
Article
03/21/2018

Restaurants and food establishments can find it challenging to stay compliant with the many regulations that apply to the food service industry. Violations can be costly and dangerous – many regulations for the food service industry carry significant fines for non-compliance, and failing to follow proper procedures in a restaurant can lead to illness or injury. Managers and owners who do not stay current with laws that apply to their restaurants can put themselves, their staff, and their customers at risk.

Health and safety laws

OSHA

The Occupational Safety and Health Administration (OSHA), an agency run by the U.S. Department of Labor, is designed to protect employees from becoming injured or ill on the job. While each state may set its own safety regulations, they must meet or exceed the minimum safety standards set by OSHA.

To stay in compliance with OSHA regulations, food service managers must follow protocols around many operational functions, including how many fire extinguishers are present, what types of work employees under a certain age may perform, how floors must be cleaned during operating hours, and what signage must be present throughout the restaurant, to name just a few. While the list of safety codes affecting restaurants is extensive, OSHA provides helpful guidelines for owners and managers in the food service industry.

Health codes

The U.S. Food and Drug Administration outlines specific food service codes and regulations for each state. Within these codes, the FDA indicates a range of regulations, such as how frequently a restaurant must be inspected by local health agencies or proper storage and handling procedures for different types of food. Since improper food handling can lead to severe food-borne illnesses, and given that some food establishments can serve hundreds of people per day, the restaurant industry is heavily regulated.

Many state health codes for food service require that managers, and sometimes even employees, successfully pass a designated food handling course. This course is designed to make sure all employees are knowledgeable about safe food handling practices, thereby minimizing the risk to restaurant patrons. Even if a food safety course is not required in your state, it may be beneficial to have employees attend anyway. Since food safety course instructors are required to stay current with the state health codes for food service, they can be a valuable resource to your employees.

Since improper food handling can lead to severe food-borne illnesses, and given that some food establishments can serve hundreds of people per day, the restaurant industry is heavily regulated.

Wage and hour laws: tipped employees, minimum wage, overtime

The federal Fair Labor Standards Act (FLSA) as well as many state and local laws and regulations impact how tipped employees must be paid, how tips must be accounted for, and how overtime and other payroll issues must be handled. This means that food service managers have an extra layer of regulations that affect their payroll management procedures.

Even if your restaurant does not have tipped employees, minimum wage regulations may be a concern. Restaurants operating in multiple states or municipalities must be aware of potential varying minimum wage rates and ensure that all employees are paid according to the applicable rate(s). If local, state, and federal minimum wage rates differ and an employee is covered by all, the employee must be paid the highest of the three.

There are also overtime regulations at the federal level under the FLSA. State and local laws may provide for additional requirements and/or coverage. For example, according to the FLSA, overtime must be paid to a non-exempt employee who works more than 40 hours in the same workweek. In certain states, however, employers may also be required to pay certain employees overtime for hours worked over 8 in one workday.

Payroll tax laws: tipped employees

Tipped employees also have special tax obligations that require compliance and oversight by managers. When tips are shared among team members via a tip pool, the regulations can become even more complicated. Fortunately, food service managers who accurately follow tip reporting codes can benefit from the FICA Tip Tax Credit. To qualify, managers must complete IRS Form 8846 to receive the credit and IRS Form 8027 to report tips if the restaurant employs more than 10 tipped employees. In addition, other federal tip reporting requirements may apply, depending on your sales volume, percentage of tipped sales, and methods of tip distribution.

Paying restaurant employees properly can be extremely challenging, but taking the pain out of restaurant payroll is possible with thorough knowledge and planning. If agency regulations aren't your specialty, many local small business associations offer classes on payroll and tax codes. Your payroll service provider can also provide assistance regarding relevant laws, regulations, and guidance that may affect your business.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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