Ever-Changing Compliance Rules Make Restaurants Vulnerable to Fines

restaurant financing compliance rules
Article contributed by Valiant Solutions

Earlier this year, the operator of a 17 location American casual restaurant chain in New Jersey and New York agreed to pay $5 million in back wages to more than 1,000 employees settling a lawsuit that it violated tipping and overtime rules, according to the U.S. Labor Department. This lawsuit embodies the complexities restaurants are confronted with daily while trying to stay compliant with constantly changing industry regulations.

One recently proposed change that is vigorously under debate in New York is the legislation to eliminate tip credits which has restaurants, associations and even some employees opposing the bill, advocated by Governor Andrew Cuomo and the labor commission. Groups against it cite the impact this change can have on paying increased wages and potentially passing the cost on to patrons impacting business and profitability. If passed, New York will join California, Alaska, Minnesota, Oregon, Washington, Wisconsin, and Nevada in eliminating the tipped minimum wage.

Kelly Mortimer Valiant Solutions Pay Stub Compliance
Kelly Mortimer, Valiant Solutions

Kelly Mortimer, Vice President Product Management Payroll at Valiant, a leading provider of cloud-based Human Capital Management Solutions with a specialization in the restaurant market said, “Whichever way the tip credit debate is decided, restaurants will need a comprehensive payroll system to stay in front of the ever-changing compliance rules and regulations.”  Mortimer added, “Regulations in the restaurant industry can be difficult to understand and they frequently change, making business owners vulnerable to fines and lawsuits. In most cases, there is no intentional malice. The truth is, there are too many moving parts that effectively managing payroll and compliance on your own can be daunting.”

Simplifying Complex Payrolls

Tip credits, minimum wage, and overtime are among the top complexities that restaurants must proactively manage as part of their payroll and reporting. New York employers specifically, are challenged with more complicated compliance and reporting requirements than employers in most other states.

Compounding the already tricky landscape of compliance for restaurants is most software products are not integrated, which could result in potential unnecessary exposure.

According to Mortimer, “Integrating payroll and HR software with scheduling can help restaurants streamline operations and proactively manage the various compliance requirements as well as provide real-time operational reporting to help businesses improve their labor costs.”

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An integrated platform backed by a knowledgeable service provider well-versed in hospitality regulations and best practices can offer the capability (and assurance) that beyond wages and salaries, critical compliance items are being handled correctly. These benefits are recognized only if the systems are configured to understand the intricacies of the restaurant industry.

The large restaurant chain operating in New Jersey and New York subsequently agreed to comply with the Labor Department’s minimum wage, overtime, record keeping and anti-retaliation rules as part of the consent judgment. This reiterates the importance of leveraging integrated systems designed to meet the specific needs of restaurants, further enabling them to mitigate the risk of exposure.

Implications of Health Insurance

The Affordable Care Act (ACA) Employer Mandate requires business entities with 50 or more full-time equivalent employees to offer full-time workers affordable, minimum value health coverage – or risk paying an Employer Shared Responsibility Penalty (ESRP).

American with Disabilities Act (ADA) Seminar compliance rulesWhile the Individual Mandate penalty was reduced to zero effective January 1, 2019 – the Employer Mandate remains the law of the land.  Businesses continue to be responsible for offering full-time workers affordable, minimum value health coverage – or risk paying a ESRP.

Additionally, Employer Reporting under the ACA (filing Form 1094-C and issuing Form 1095-C to employees) also remains the law of the land. The IRS is enforcing both the Employer Mandate, and the Employer Reporting requirements – sending penalty letters for both the 2015 and 2016 reporting years (2017 penalty letters are not far behind).

“The second half of 2018 is a perfect time for restaurants to review their payroll processes and double-check if they are following the latest rules,” added Mortimer. “Valiant has been servicing the hospitality market for more than 20 years and we pride ourselves on helping clients proactively manage the ever-changing compliance rules and regulations.”

New (and current) legislation around tip credits, minimum wage and healthcare will always require a higher layer of reporting for restaurants to maintain compliance. The good news is there are tools and resources to help manage these complexities while helping to reduce costs and increase profitability. Businesses that are proactive with strong internal systems in place will be well-positioned to navigate through the changing tides of human resource and payroll regulations.