Restaurant Owners – Wage and Hour Claims

With the many responsibilities that come with being a restaurant owner, the sky is really the limit for the types of insurance coverage necessary to be completely protected. One type of coverage that is particularly overlooked is “Wage and hour coverage”. Wage and hour claims are becoming more and more common and can cause some serious issues for business owners and, although they are not entirely exclusive to the food industry and restaurant owners, this class of business is highly susceptible to this sort of claim for a variety of different reasons.

One of the most alarming issues with wage and hour claims is that many food industry related businesses are not aware of the exposure they have to them and how it can impact their business. One of the most common Wage and hour claims we see are claims filed by non-exempt employees (employee who is eligible to receive overtime pay under the Fair Labor Standards Act) who allege that their employer did not pay them overtime pay. Other claims include other types of pay issues such as failure to grant employees rest and meal breaks, time shaving, off-the-clock work and failure to pay wages when they are due to an employee.

Below is a list of reasons why wage and hour coverage could prove to be an invaluable coverage for you to carry as a Restaurant Owner.

  1. More employees now qualify for overtime pay. In the beginning of 2016, the Department of Labor increased the salary threshold that determines if you qualify for overtime pay from $23,660 to $47,476. This change incorporates a much larger group of employees who now qualify for overtime pay; in the restaurant industry specifically it could impact middle management employees as well as key hourly employees. Management and Key Hourly employees most likely were making over $23,660, and therefore didn’t receive overtime pay, but with the change in the law they now must be paid time and a half for any time working over 40 hours or else they can file a claim.
  2. Off-The-Clock Work. This is a very common occurrence in restaurants and the food service industry. Off the clock work is best described as work that is performed off the clock and is unpaid. This can often be deemed illegal and could result in a claim being filed against an employer. If you as an employer ask an employee to clock out before performing work such as side work, counting items for inventory, or counting and balancing their register for example, they can file a claim for unpaid wages. The employees should be paid for this work, but far too often employees that are close to hitting 40 hours are pressured to clock out so they won’t hit OT and perform the work anyway.
  3. Restaurants with multiple locations. Paying employees that work at multiple locations via separate pay checks from different corporate entities for each of those locations could be an issue. It is not uncommon for restaurant owners or ownership groups to have more than one location and have employees working at 2 or more of those locations which in itself is not problem at all. The problem arises if you are not aggregating the hours that the employee worked and are instead paying them with separate pay checks. Employees working at establishments owned by the same owner or ownership group have the right to aggregate their hours between both locations and receive overtime pay. Paychecks from separate entities can technically be interpreted as a way to circumvent the owner’s obligations to pay employees overtime wages. If an employee works 20 hours at location one and 30 hours at location two, they should be paid for the 10 hours of overtime they have accrued or they can file a claim.
  4. Employee turnover. Even terminated employees can file a claim based on wages not being paid to them. Restaurants often hire a number of high school and college aged employees. Between leaving for college after a break and an employee not taking the job seriously and not showing up, terminations are bound to occur throughout the year. While this is a common occurrence, the way the termination is handled can determine if a claim is filed or not. If an employee is terminated, the restaurant owner must advise the terminated employee in writing of the date of termination and the date that his/her benefits will end. Additionally, terminated employees must receive any earned wages on the first scheduled payday following termination at the latest. Failure to pay a terminated employee earned wages in a timely manner, no matter the reason, can result in a claim.

These are just a few ways a restaurant owner can be exposed to wage and hour claims. However, have no fear, there are ways to protect your business and mitigate the risk associated with these claims. Wage and hour coverage can be endorsed onto most Employee Practices Liability Policies and provide coverage for you. It is important to speak with your broker about an EPLI coverage and wage and hour coverage specifically as some EPLI policies exclude wage and hour claims or limit the coverage they will provide. Having the proper policy tailored specifically to your business can save you from a world of headaches and even save your business from going out of business altogether.

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