The Contented Cow Blog

Building Workplaces That Work

We do a fair amount of work with the hospitality industry, and to be sure, they are feeling the pinch right now. Operating on the leading (bleeding?) edge of the economy, restaurants and other food service operators tend to suffer a lot of the early pain in an economic downturn. Just ask some of the folks at Starbucks.

The current climate is especially pernicious because the very factors that are reducing discretionary spending are also causing food costs (especially dairy products and seafood) to skyrocket. As a result, restaurant operators are scrambling to take costs out of the system, and yet do it in a way that doesn’t totally alienate the guest.

Inevitably some turn to their employees, as they well should, to find ways to do more with less. But, unfortunately, the industry’s “just get it done” culture that operates fairly well most of the time can put the entire enterprise way out on a legal limb when little things like time clocks come into play. In the past month, I’ve overheard food service managers in two different chains tell employees to “get it done” while in the same breath admonishing them that, “there is (wink) no (wink) overtime.” Translation - I expect you to do it off the clock.

Unfortunately, in most cases, the person complies. I say “unfortunately” because in so doing, the fuse on this little liability, which can be a very long fuse indeed has just been lit. In some cases the person, a gung-ho employee goes along with the program, and for so long as they remain gung-ho, nothing comes of it. Many others aren’t as gung-ho or benevolent, however. Some will be receptive to advances by labor unions, employee “advocacy groups” (fronts for unions), or attorneys who prefer to do their ambulance chasing with a fork. Others prefer to impose their own remedies and take advantage of a target-rich environment by beginning to confuse their money with the company’s (or guest’s) money. Either way, the business loses, and the losses are bigger than you might imagine.

Despite having a largely pro-business judiciary for some time, employers are getting whacked with stiff fines and settlements as the result of federal wage and hour law violations. The July 14-21 issue of Business Week (p. 7) reported an adverse ruling against Wal-Mart by a Minnesota judge in a case involving 2 million alleged separate instances of employees being forced to work off the clock or cut short their breaks. According to the article, in addition to the $6.5 million back pay award, the company could potentially be liable for punitive damages up to $2 billion (based on a $1,000 per event maximum penalty).

Similarly, the June 20 issue of Nation’s Restaurant News (p. 6) chronicled an expected $3.9 million settlement of two wage and hour related lawsuits against Fireman Hospitality Group, the New York operator of upscale restaurants such as Redeye Grill, Cafe Fiorello, Brooklyn Diner, and Shelly’s.

Any way you cut it, working people off the clock, or funding operations through some of the nefarious tip sharing arrangements that pop up from time to time is simply not worth the risk. Whether you’re serving tacos or t-bones, it takes a hell of a lot of covers to pay one of these supersized fines.

For the rest of us, who spend our time on the other side of the plate, we would do well to remember that when we do dine out, we’re really not going to balance the household budget by stiffing a deserving server out of a tip. Do the right thing, even though no one is looking.

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