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The restaurant, bar and food service industry continues to be one of the most highly abused industries when it comes to complying with California Employment law.  Restaurant employees are often cheated out of their hard-earned wages, and employers are constantly subjected to costly wage-and-hour litigation which undermines the successes of the business. Whether you are an employer or employee, you should familiarize yourself with the rules of the game.  The following is a list of top ten California labor laws that food and beverage employers frequently violate: 


1.  Employers must pay at least a minimum wage rate.


The minimum wage rate in California is $8 per hour. Paying anything less is a violation of California minimum wage law. This is true even if an employee personally agrees to a lesser hourly rate. In addition, an employer may not use tips earned by an employee (e.g. waiter, bartender, busser, or food runner) as a credit to satisfy the minimum wage requirement.

Each county has its own minimum wage rate; therefore, California employers must refer to their county’s minimum wage ordinance to determine an applicable rate. For example, San Francisco County has the highest minimum wage rate in the nation, which is now $9.92 and will become $10.34 as of January 2012.

Damages for violating California minimum wage law are considerable and include unpaid minimum wage with interest, statutory penalties, cost of litigation, and attorney fees.

2.   Employees must be paid for all hours worked.


California Labor Code requires employers to compensate workers for all hours worked. Specifically, employers must pay for all job duties that constitute an “integral and indispensable part of the principle activities” for which employees are employed.  These principle activities include training, attending pre-shift meetings or workshops, preparing a work station, doing side-work, and checking-out.  Some restaurant managers require their staff to clock-out before taking a 10-minut rest period. Such practice is illegal under California labor law.

3.  Overtime work must be paid at a premium rate.


In California, every non-exempt employee who works beyond normal hours is entitled to overtime. Waiters, bussers, food-runners, hostesses, and cooks are non-exempt employees and as such they are entitled to get paid one and one half times of a regular pay for all overtime hours.  (To learn more about California overtime law, read the following article).

Oftentimes restaurant owners misclassify their floor and kitchen workers as managers or assistant managers, which allows them to bypass California overtime laws. To classify a worker as a manager, an employer must demonstrate that worker’s job responsibilities and duties meet all of the requirements of executive exemption.

4.  Restaurant owners and managers are not allowed to take tips.


Section 351 of the California Labor Code prohibits employers and their agents from taking tips from employees serving customers. All tips left by customers belong exclusively to an employee who earned them. Restaurant owners, managers, supervisors or their assistants are not allowed to collect or receive tips. However, California labor law does not prohibit employers from having a tip polling policy that requires employees to share tips with other workers who provide services to customers.

Furhermore, employers who allow tips to be paid by credit card may not deduct from the tips any fees or cost associated with the credit card transaction.  All credit card tips must be paid not later than the next payday after the date the customer authorized the credit card payment.

A wait staff should keep in mind that California courts distinguish between tips and service charge. While a tip is property of an employee, service charge belongs to an employer. This distinction is crucial, because it allows employer to do with service charges whatever he or she wishes and employer is not required by law to distribute service charge to the company’s wait staff. The rationale behind it is that tips are voluntarily left by the customer, but service charge is a mandatory fee that customers have to pay to the house.

5.  Employees are not responsible for customer walk-outs, register shortage, order mistakes and other business related losses.


Industrial Commission Wage Order No. 5 Section 8 prohibits an employer from making any deduction from the wage or requiring any reimbursement from an employee for any cash shortage, breakage, or loss of equipment. Cash shortage, loss or breakage of equipment, customer walkouts, waiter’s mistakes are considered to be business expenses that cannot be passed onto the employee. The only time when employers are permitted to make such deductions is when it can be shown that the shortage, breakage, or loss is caused by a dishonest or willful act, or by the gross negligence of the employee. In other words, if a cashier makes an honest mistake while handling a cash register, he or she is not responsible for shortage. However, if the register is short because the employee did not follow his employer’s instructions and refused to use a calculator, such act or omission would be equivalent to the gross negligence and the employee may be held liable for shortage.  Most importantly, mere allegations that an employee steals money from the register are not sufficient; employer needs to present clear evidence of dishonest conducts or gross negligence.

6.  Employer must pay for uniform and its maintenance.


If employers require their workers to wear uniforms as a condition of employment, employers must pay for and maintain such uniforms. Industrial Commission Wage Order No. 5 defines the term “uniform” as any “apparel and accessories of distinctive design or color.” However, employers are not required to pay for  “basic wardrobe items which are usual and generally usable in the occupation.” For example, if an employer requires all wait-staff to wear jeans and pastel color shirts of no specific design, it would be responsibility of an employee to purchase and maintain those clothing items. However, if an employer requires workers to wear  the same jeans and pastel color shirts, but with the company’s logo, then the  employer would have to pay for them.

7.  Employer must provide meals and rest periods.


Meal Periods. All non-exempt employees are entitled to at least a 30-minut meal break for every five hours worked.  Such breaks must be scheduled at any time before the end of the fifth hour of work. If during this 30-minute meal period, an employee is relived from all work duties and is allowed to  leave work premises, then  the meal time itself does not count as part of the hours worked and is not compensable (“off-duty”). However, If an employee  is not permitted to leave the workplace during the meal period due to a nature of work, the meal time counts as part of hours worked  (e.g. overtime) and is compensable (“on-duty”).  In addition if employee’s work shift is six hours or less,  the employee may voluntarily agree to waive his or her right to a 30- minute meal break. Due to the nature of hispitality industry, most of the employees (e.g. servers, bartenders, bussers, and food runners) are not permitted to leave their workplace  during the meal break. In such cases, the employer may not require its workers to clock out before taking the meal breack and,  must pay their time.

Rest Periods. For every four hours of work, all non-exempt employees are entitled to at least a 10-minut rest break.  Employer must make sure that rest breaks are provided in the middle of a 4-hour work period, if practicable. Unlike meal periods, rest periods are  counted as time worked and therefore, the employer must pay for such periods. Since employees are paid for their rest periods, they can be required to remain on the employer’s premises during such periods.

If an employer fails to provide meal or rest periods, such employer must pay the employee one additional hour of pay at the employee’s regular rate of pay for each work day that the meal or rest period was not provided.

8.   Employers must preserve all employment records.


Under the federal law, the following records must be maintained for at least three years from the last date of entry: payroll records, including each employee’s name, address, occupation, hours worked each day and week, wages paid and date of payment, amounts earned as straight-time pay and overtime, and deductions, etc. In addition, employers are required to keep the following records for at least two years: time and earnings cards; wage rate tables; work schedules; order, shipping and billing records; and records of additions to or deductions from wages.

Any employee, including former employees, may request  copies of his or her payroll records. An employer has  21 days to provide the records, or permit the inspection.  If an employer fails to comply, he is subject to  a $750 fine, and the employee may sue to obtain the information and recover costs and fees.

9.  Employer must disclose certain information on each pay stub.


Employers are required to include the following information on the pay stub when wages are paid:

·         Employer’s  name and address;
·         employee’s name and last four digits of social security number;
·         inclusive dates for which the employee is being paid;
·         gross wages earned;
·         the applicable hourly rate and total hours worked for hourly employees;
·         all deductions; and
·         net wages earned. (statement listing regular and overtime hours)

10.  Employer must pay wages twice each calendar month.


With a few exceptions, California Labor Code Section 204  requires that all non-exempt employees  must be paid twice each calendar month. Specifically, wages earned between the 1st and 15th of the month must be paid between the 16th and 26th; and wages earned between the 16th and the end of the month must be paid between the 1st and 10th of the following month.

San Francisco Paid Sick Leave

San Francisco County requires employers to pay for employee’s sick leave. Specifically, under the San Francisco Paid Sick Leave Ordinance 12W, qualified employees (i.e. those who worked for the company 90 days and more) are entitled to one hour of paid sick leave for each 30 hours worked. Depending on the size of employer, certain hour caps may apply. For example, if the company employs less than 10 workers, the maximum number of paid sick leave hours an employee can earn is 40 hours. Employers with more than 10 employees are subject to a 72-hour cap.

Legal Assistance

The foregoing list of labor law violations is not exhaustive and there are many other wage-and-hour requirements that each employer must follow. The legal consequences of Labor Code violations are severe and cost of defending a labor suit is costly. Whether you are an employer or employee, you must familiarize yourself with the above rules. If you are an employee and your wage-and-hour rights have been violated, you may be entitled to recover damages, including back pay, overtime, statutory penalties, and cost of the suit. However, if you are an employer and you are not sure whether your business practice is in full compliance with California Labor Code, feel free to contact the author of this article, who is a San Francisco employment law attorney, for a free consultation.