Lawsuits by Wait Staff is the Latest Big Trend in the NYC Restaurant Scene

Running a successful restaurant is not for the faint of heart. Indeed, nationwide, most new restaurants close within their first year—industry experts put the failure rate at anywhere from 60 to 80 percent.  And if you happen to be fortunate enough to own a successful New York City restaurant, you have an additional hurdle to overcome—the risk of being subject to a lawsuit by your wait staff.  After all, NYC restaurants have become a frequent target of their disgruntled employees armed with ambitious attorneys alleging wage and hour violations. 

While it is difficult to explain the exact reason for the rise in litigation in the restaurant industry, one possibility may be the power of the internet.  Blogs, complaining about everything from rude customers to poor pay, are frequent draws on the internet. Not surprisingly, law firms have created websites for waiters with respect to their rights under New York’s wage and hour laws.   One area that appears to be causing great difficulty for restaurant owners is New York’s spread of hours regulation for the hospitality industry. Read our prior blog on how that works.   

In the month of August alone, class action lawsuits were filed in NYC alleging spread of hours violations against celebrity chef Daniel Boulard and Pret A Manger, a popular British chain restaurant.  In addition, more than 100 current and former employees of Adrianne’s Pizza were certified as a class in their lawsuit alleging a spread of hours violation against this popular financial district hotspot.  How costly can these lawsuits be?  Recently, the East Japanese Restaurant agreed to settle a lawsuit that included spread of hours claim for $1.25 million dollars.  This seven digit number does not include attorney fees or the amount of time and energy the owners had to spend to resolve the lawsuit.  

Taking the time and energy to ensure compliance with New York’s spread of hours law (along with other wage and hour regulations applicable to the restaurant industry) is the most cost effective approach to counteract this rise in litigation. 

Making Employees Work Extended Overtime Hours May Be Imprudent and Costly, But Could Be Legal

Everyone knows that exempt employees—those who aren’t eligible for overtime pay such as executives and management—can be made to work 24/7/365.

What about nonexempt employees—those who do earn overtime wages? Can you make them work 9, 10, 12, or more hours in a day?

In many states--yes, you can force most adult employees to do just that. You just have to pay them for it (and potentially provide periodic meal or rest periods as required). Child labor laws generally regulate the number of hours children can work per day and workers in some regulated industries (truck drivers and airline pilots for example), may have maximum shift lengths. Collective Bargaining Agreements may also limit the hours unionized employees can be scheduled to work. But for many employees in the private sector, such restrictions on their hours worked do not apply.

Of course, hourly employees must receive their base hourly wage for all hours worked, plus regular overtime pay (time-and-one-half their regular hourly wage) for hours worked over 40 in a work week. In a number of states, additional premium pay may apply. For example, in California, if someone works more than 8, but up to 12, hours in a day, he or she earns daily overtime at time-and-half for hours 9, 10, 11, and 12, and daily double time for any additional hours worked in that day. New York has a “spread of hours” rule, which requires that employees with work days longer than 10 hours (i.e. more than 10 hours from start time to finish time even if there is a long mid-day break) receive an additional hour’s pay at minimum wage. But, that wage requirement, like the California daily overtime pay rule, does not dictate a maximum number of hours employees can work per day or per week.

Federal law, as set out in the Fair Labor Standards Act says nothing about how many hours someone can work in a day or at a time. In fact, under the FLSA, the only limit on how many hours an employee can work in a week is the number of hours in a week. To work an employee more than 168 hours in a week requires breaking the laws of physics, not the FLSA. The result may be different under state law, however. Some states, such as New York, Illinois and Wisconsin, have laws putting a cap on the number of days certain employees can work per week (often called “one-day-rest-in-seven” laws). But, even those laws do not prohibit employers from scheduling long days during the six days those employees work.

In many states, if an employer’s wallet is deep enough, the need great enough, and the employee is not covered by a wage order dictating otherwise for the employee’s position (such as for individuals in certain health care positions, mining or other safety-sensitive positions), or by other regulations, an employee can be required to work all day and night long—as long as the employee is properly compensated under the law (and meal or other rest-break laws are complied with). While it is probably not advisable, it may be permissible.

Keep in mind as well, however that, even if permissible, some states may have laws or regulations making long hour requirements difficult to enforce. For example, in California, employees cannot be disciplined or terminated for refusing to work more than 72 hours in a week—even though the law does not limit the work-week to 72 hours.

Thus, although it may not be prudent to do so, and morale concerns may dictate otherwise, where an employee’s hours are not otherwise limited by applicable regulations or otherwise, an employer can require long work days (and long weeks) so long as the company pays its employees appropriately, under federal and state wage payment law, and provides any required breaks (which generally are not as numerous as most employees believe).

However, if the issue is just “can the company mandate overtime hours?” For the most part, the answer is “yes.”

Spreading the Pain: New York Hospitality Wage Order Makes All Restaurant and Year-Round Hotel Workers Eligible for Spread-of-Hours Pay

To state the obvious-- legal terms can be confusing. When mixed in with already confusing state wage and hour laws, employers can be left throwing up their hands in surrender. Take “spread of hours,” for example, which could mean practically anything-- though in practice, it mostly means headaches for well-intentioned employers.

“Spread of hours” is essentially the spread of time from the first hour an employee works in a day, through the end of that employee’s last shift. This is not the same as the number of hours that an employee works in a day. For example, many employees in the hospitality industry work a lunch shift, have a lengthy break, and then return to service the dinner crowd. Their “spread of hours” could be 11 ½ hours — an 11:00 a.m. start for the lunch shift through a 10:30 p.m. end after dinner even if the employee only worked 11:00-2:00 for lunch and 5:30-10:30 for dinner (8 hours).

A New York labor law regulation, § 142-2.4, requires that employees working a “spread of hours” that is more than 10 hours in any working day, receive an extra hour’s pay at minimum wage (currently $7.25/hour under both Federal and New York law). There’s been a difference of opinion, though, as to whether this rule applied to all employees or only those being paid at or near the minimum wage.

The recent New York Hospitality Wage Order eliminates the ambiguity, at least as it applies to certain workers in the hospitality industry. The Wage Order provides that “[s]pread of hours . . . is due to all employees at any pay rate, not just to those paid at or very near to the minimum wage.”

The Wage Order requires that all employees in restaurants and year-round hotels, regardless of pay rate, receive an extra hour pay at minimum wage when their spread of hours in a day is greater than 10. There is no room for discussion—if a restaurant or year-round hotel worker’s beginning and end times in a work day are separated by more than 10 hours in a day, then the employer still owes him or her an extra hour’s pay, even if this person is being paid $10, $15, $20 (or more!) dollars an hour. Failure to pay spread of hours pay can make an employer liable for any amounts found to be due the employee, along with potential fines, fees, penalties and interest.

It remains to be seen whether the DOL will apply this uniformly to all industries, or whether ambiguity will still reign outside the hospitality industry.