Industry HR Guide
Restaurant HR Compliance
Tip credits, overtime, scheduling laws, and minor work rules — the HR issues that hit restaurants hardest, explained plainly.
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Wages
Tip credits: what you can and can't do
Federal law allows you to pay tipped employees as little as $2.13/hr in cash wages — as long as tips bring their total hourly earnings to at least $7.25. This is the "tip credit." But whether you can use it depends entirely on your state.
States where the tip credit is eliminated — full minimum wage required regardless of tips
California, Oregon, Washington, Minnesota, Montana, Alaska, Nevada (for most workers), and several others require you to pay the full state minimum wage before tips. Tips are then on top. Paying the $2.13 federal cash wage in these states is a wage theft violation.
Federal tip credit
$2.13/hr cash wage
Tips must bring total to $7.25/hr minimum or you must make up the difference
Tip credit states (examples)
TX, FL, NY, IL, PA, OH
Check your state's cash wage — NY is $10.35/hr, not $2.13
No tip credit states
CA, WA, OR, MN, MT, AK
Full minimum wage required regardless of tips earned
Tip credit — overtime calculation
Based on full minimum wage
Overtime must be 1.5× the full minimum, not just the $2.13 cash wage
The "80/20 rule" — side work limits
Under the FLSA, you cannot apply the tip credit to time when a tipped employee spends more than 20% of their shift on non-tipped work (rolling silverware, cleaning, prep). Time spent on non-tipped tasks in excess of 30 continuous minutes must be paid at the full minimum wage. The DOL actively enforces this in restaurants.
Tip Pooling
Tip pooling rules after the 2018 FLSA amendment
Tip pooling rules changed significantly in 2018. The law now distinguishes between employers who take a tip credit and those who don't.
If you take a tip credit: Tips may only be pooled among employees who customarily receive tips (servers, bartenders, bussers, food runners). Kitchen staff cannot participate. Managers and supervisors are always excluded.
If you do NOT take a tip credit (pay full minimum wage): You may include back-of-house employees (cooks, dishwashers) in the tip pool. This gives restaurants in no-tip-credit states more flexibility to share tips with kitchen staff.
Managers and supervisors cannot participate in tip pools — ever
Regardless of tip credit status, owners, managers, and supervisors are prohibited from receiving any portion of a tip pool. A manager who takes a share of the tip pool exposes the business to the full amount of misappropriated tips plus an equal amount in liquidated damages, plus attorney fees.
Overtime
Overtime for restaurant workers
All non-exempt restaurant employees are entitled to overtime — including tipped employees, prep cooks, and dishwashers. There are no restaurant-specific overtime exemptions under federal law.
The regular rate for tipped employees: When calculating overtime for a tipped employee, the base rate is the full minimum wage (not the $2.13 cash wage). So a server in a tip-credit state working 45 hours earns 1.5× $7.25 (or your state's minimum) for the 5 overtime hours — not 1.5× $2.13.
Federal overtime
1.5× after 40 hrs/week
All non-exempt employees regardless of tip status
California / Nevada daily OT
1.5× after 8 hrs/day
Daily overtime applies regardless of weekly total
Double time (California)
2× after 12 hrs/day
Or on 7th consecutive day of workweek
Exempt managers
$684+/week salary required
Must primarily manage and supervise — not spend majority of time on line work
Misclassifying working managers as exempt is one of the most common restaurant wage violations
A shift manager who spends most of their time cooking, serving, or cleaning alongside staff does not meet the executive exemption — they must receive overtime. The duties test, not job title, determines exempt status.
Minor Labor Laws
Hiring minors in restaurants
Restaurants frequently hire workers under 18, making child labor compliance essential. Federal law sets minimums; most states are stricter.
Ages 14–15
Limited hours only
Max 3 hrs on school days, 18 hrs/week during school, 8 hrs/day and 40 hrs/week when school is out. No work before 7am or after 7pm (9pm summer).
Ages 16–17
Unlimited hours, restricted equipment
May work any hours but cannot operate slicers, grinders, power-driven bakery machines, or most deep fryers
Work permits
Required in most states
CA, NY, NJ, PA and others require employer verification and on-file work permits. Keep copies.
Hazardous equipment
Under-18 prohibited
Meat slicers, circular saws, dough rollers, commercial mixers, and most commercial fryers are prohibited for workers under 18
Scheduling Laws
Predictive scheduling laws for restaurants
If you operate in any of the following markets, predictive scheduling laws impose significant obligations — advance schedule notice, premium pay for last-minute changes, and rest between shifts.
Oregon (statewide)
New York City
Chicago
Philadelphia
Seattle
San Francisco
Emeryville, CA
Los Angeles
Advance notice required
Typically 14 days
Posted schedule must be provided at least 2 weeks in advance in most jurisdictions
Last-minute change premium
1–4 hrs extra pay
Adding or changing shifts without adequate notice requires premium pay in most predictive scheduling jurisdictions
Rest between shifts
Typically 10–11 hrs
Employees may decline split shifts or clopening shifts without penalty in covered jurisdictions
On-call restrictions
Limited or prohibited
Requiring employees to be "on-call" without guaranteed pay or advance notice is restricted in NYC, SF, and Seattle
Termination
Final pay and termination in restaurants
Restaurants have high turnover, which means final pay deadlines come up constantly. Getting them wrong is expensive — California charges a daily penalty equal to the employee's daily wages for up to 30 days.
California
Immediate at termination
Resignation with 72+ hrs notice: final day. Quit without notice: within 72 hours.
New York
Next regular payday
For both fired and resigned employees
Texas
Within 6 calendar days
For involuntary terminations. Resignation: next regular payday.
Florida
Next regular payday
For both fired and resigned employees
FAQ
Restaurant HR — common questions
Can I require employees to pay for walkouts or register shortages?
Generally no. Deductions that bring an employee's hourly rate below minimum wage are illegal under the FLSA. Many states prohibit such deductions entirely. Pursue shortages through separate civil action — never by withholding wages.
Do I need to provide meal and rest breaks?
Federal law doesn't require meal breaks, but many states do. California requires a 30-minute unpaid meal break for shifts over 5 hours and a 10-minute paid rest break per 4 hours — missed breaks trigger 1-hour premium wage penalties. Oregon, Washington, New York, and Illinois each have their own rules.
Check your state's requirements →
What is the FICA tip credit and should I claim it?
The IRS Section 45B credit lets employers claim a tax credit for their share of FICA taxes paid on tips above the federal minimum wage. For restaurants with high tip volumes, this is a meaningful tax benefit. Consult your accountant — it applies only to food and beverage establishments where tipping is customary.
What are the rules for hiring minors?
Workers 14–15 have strict hour limits during the school year and cannot operate most commercial kitchen equipment. Workers 16–17 may work unlimited hours but cannot operate slicers, grinders, or commercial fryers. Most states also require work permits — keep copies on file. Violations carry fines up to $10,000 per violation.
Can I pay my kitchen manager a salary and skip overtime?
Only if they meet the executive exemption: salary of at least $684/week AND their primary duty is managing the operation AND they supervise at least 2 full-time employees AND they have real authority over hiring/firing. A salaried "manager" who spends most of their shift cooking on the line is not exempt — they are entitled to overtime.