Preventing Wage and Hour Disputes in the Hospitality Industry

Posted on: August 5, 2020 by RMS Hospitality

Every day, approximately 30 hotels, restaurants, and bars throughout the United States are hit with a Fair Labor Standards Act (FLSA) accusation by the U.S. Department of Labor’s wage and hour division. From not being paid overtime to not being paid at all in some circumstances, hospitality workers bring enough wage and hour disputes to total an annual loss of $280 million.

Wage and hour claims are triggered by any number of situations, including pay discrepancies and employee misclassifications. Workers in the hospitality industry can file a lawsuit when they are kept over their rest break or are held back from their meal break. What’s more, an increasing number of hospitality businesses are being investigated for FLSA compliance issues.

To prevent these hospitality wage and hour disputes, hospitality clients can employ a number of effective tactics limiting their exposure and financial loss. Here’s a closer look.

How to Prevent Wage & Hour Disputes in Hospitality

The first step that employers in the hospitality industry can take is understanding the most common points of exposure when it comes to wage and hour disputes. Certain factors make employers uniquely at risk for violations.

Let’s start with tipping. Since restaurant employees mainly rely on tipping instead of minimum wage earnings, it makes minimum wage compliance matters more complicated for their employers. The minimum wage for tipped workers is much lower than regular minimum wage. Still, if an employee’s hourly wage and tips do not equal the regular minimum wage, then the employer is responsible for making up the difference.  Restaurant employers who pay their tipped employees the minimum wage without ensuring that the standard minimum wage is met may end up losing a claim.

Restaurant management and ownership should also make sure to stay on top of documentation when it comes to their company’s wage and hour policies and procedures. They should train their management staff to understand them and ensure they are implemented correctly. Management should also have a thorough understanding of how the rules work and be able to explain them to workers to avoid any misunderstanding or potential compliance issues.

Employee Classifications

Misclassifying employees is a big problem in the hospitality industry, as noted above. In the case of restaurants, penalties occur when employees are misclassified as management or independent contractors.

Some restaurants found to be in violation of the FLSA have been caught classifying their workers as management to avoid paying them overtime wages. If found in violation, restaurants are required to compensate workers for their unpaid overtime wages and they may also be required to pay for legal fees and other related costs.

Protecting Losses with Restaurant Insurance

While it’s essential to understand the risks and exposures that lead to wage and hour compliance issues, restaurant owners must also understand the importance of having wage and hour disputes covered by the right kind of insurance. Those in the hospitality industry should always be protected from claims with a well-rounded restaurant insurance program that covers these claims and provides protection for other violations. Having restaurant insurance should be standard with hospitality employers as it can help keep their losses and legal costs low.

About RMS Hospitality Group

At RMS Hospitality Group, our expertly crafted policies are written specifically for the hospitality industry. We offer custom-tailored solutions to meet any venue’s specific needs. For more information, contact our knowledgeable experts today at (888) 359-8390.

Posted in: Hospitality Insurance

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