Tag: Employers

The Bottom Line on the Impact of Minimum Wage Hikes on the Restaurant Industry

Minimum wages are rising across the country, with well over a dozen states, plus many cities increasing minimum wages over the past few years.  As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.

 The Bay Area of California was one of the first regions to begin increasing minimum wages, and as of January 1, 2018, the minimum wage increased by 37 cents to $13.23 in Oakland, and in San Francisco it rose from $13.00 to $15.00 effective July 1, 2018.

One impact on the restaurant industry is the change from full service restaurants – with hosts and full waiter service – to counter service.  Some restaurants have actually seen such changes result in significant sales increases – by as much as 20% – after the change from full service to counter service.  And at the same time, being able to reduce menu prices due to the ability to cut staff due to the change to a counter service format.  The downside here is that there are fewer jobs available to restaurant workers with owners focused on a lean labor paradigm.  At some restaurants, cooks serve dual roles – both preparing food and delivering it to customers.  Customers are also finding themselves taking on new ‘responsibilities’ such as being able to text additional orders rather than going back in line it they want more food than they originally ordered at the counter.

Thus, the increase in minimum wage has resulted in more satisfied employees (albeit fewer) earning a better living, increased restaurant industry innovation, and restaurants becoming more accessible to the population as whole as a result of lower menu prices.

Seattle became the first major city in the country to pass a $15.00 minimum wage law in 2014.  Large restaurant groups and franchises were particularly concerned about the increase because employers with more than 501 workers were required to increase wages on a set schedule reaching $15.00 per hour this year.  As a result, large Seattle restaurant groups and chains were forced to look for ways to adjust and innovate.  Many felt that increasing menu prices was not an option because of concerns that such increases would result in lower revenue.  So these restaurants did away with discretionary tipping and, instead, implemented set service charges of fifteen or twenty percent.

To offset rising labor costs, some restaurants add a surcharge of three to five percent to customers’ checks.  In March of last year, the Wall Street Journal even ran an article entitled “New on Your Dinner Tab: A Labor Surcharge.”  Restaurant owners found that raising menu prices lead customers to choose less expensive items than they normally would, and that the surcharge helped mitigate the increased costs of doing business.

In addition to raising prices, in order to deal with increased wages in the restaurant industry, some businesses often cope with minimum wage increases by firing staff.  Earlier this year, Red Robin Gourmet Burgers announced it would eliminate busboy positions at 570 restaurant locations. Many single location restaurants have also had to eliminate busboys and other staff positions.  Others have not been able to adapt and have had to close their doors. Some have turned to technology to compensate for the loss of labor and to reduce expenses. Large chains such as Chili’s, Applebee’s, and Olive Garden have replaced some servers with table-side tablets for placing orders and paying bills. 

Technology has also helped other businesses expand.  For example, popular online service, GrubHub, has reduced the number of customers dining out, as consumers can enjoy a restaurant style meal without getting up off their couch.  

The takeaway for restaurants facing increasing minimum wages and labor costs?  Scrutinize your budget and personnel and determine how to satisfy ever-changing employee and customer demands, and be willing to change.

For further information regarding this topic, please contact:

Jonathan M. Weis at jweis@lgattorneys.com or 312-368-0100.

 

 

 

Predictive Scheduling Legislation: What You Need to Know to Avoid Costly Surprises

In approximately a dozen states and a number of smaller municipalities across the U.S., initiatives have been introduced that would allow state and local governments to dictate how restaurants (and retailers) schedule their employees. Some view this approach as interfering with employers’ rights to control the workplace, while others view it as a necessary tool to protect the rights of food industry and other retail workers.  The impetus for the new rules – often referred to as predictive scheduling laws – emanates from the fact that workers often have very little ability to make adjustments to their work schedules in order to meet their responsibilities outside of work.  Unpredictable and unstable work schedules have been fairly well documented in the food service and preparation industries, as well as in retail and custodial occupations.

Predictive scheduling laws and proposals generally include certain common provisions: (i) advance posting of schedules, (ii) employer penalties for unexpected schedule changes, (iii) record-keeping requirements, and (iv) prohibitions on requiring employees to find replacements for scheduled shifts if they are unable to work. In Congress, the pending Schedules That Work Act would require that schedules be provided in writing two weeks in advance with penalties for changes made with less than 24 hours’ notice.  As those changes are implemented, restaurant owners are finding that they must make significant adjustments to how they run their businesses in order to stay in business.

“On-call” or “predictive scheduling” activists argue that retail employers too often use scheduling practices that directly interfere with employees’ personal lives and ability to plan around their work hours, while others believe government intervention in the scheduling of employees through a one-size-fits-all approach intrudes on the employer-employee relationship and creates unnecessary mandates on how a business should operate.  Many in the food service industry are concerned that predictive scheduling legislation will impede employers’ need to adapt to changing conditions in a store, particularly small, independently owned businesses that have limited staff and resources and may not be able to afford the penalties related to violations.  Some employees have also voiced concern that they could lose some of the flexibility that attracted them to the food service industry in the first place.

There are a variety of common components of predictive scheduling legislation.

  • Employee Scheduling Requests.  Giving employees the right to make scheduling requests without employer retaliation.  Employers would be required to consider scheduling requests from all employees and provide a response. In some instances (for healthcare issues for example), the employer would be required to grant the request unless there is a bona fide business reason not to do so—e.g., an inability to reorganize work among existing staff or the insufficiency of work during the periods the employee proposes to work. The right to request provision can be found in laws recently enacted in Vermont, New Hampshire, Seattle, Washington, and San Francisco and Emeryville, California.  (Similar laws have been in place for more than a decade in the United Kingdom.)
  • Shift Scheduling Changes.  Requiring employers to be pay employees for a minimum of four hours of work or the minimum number of hours in the scheduled shifts, whichever is fewer, when an employee is sent home from work early without being permitted to work his or her scheduled shift.  In addition, if an employee is required to call in less than 24 hours before the start of a potential shift to learn whether he or she is scheduled to work, an employer could be required to pay the employee a premium, equivalent to one hour of pay. This provision is found in eight states and the District of Columbia.
  • Split shift pay. If an employee is required to work a shift with nonconsecutive hours with a break of more than one hour between work periods, an employer could be required to pay the employee a premium for that shift, equivalent to one hour of pay. Provisions like this exist in District of Columbia and California.
  • Advance notice of schedules. When an employee is hired, an employer could be required to disclose the minimum number of hours an employee will be scheduled to work. If that minimum number changes, the employer could be required to give the employee two weeks’ notice of the new minimum hours before the change goes into effect. In addition, employers can be required to give employees their work schedules two weeks in advance and, if an employer makes changes to this work schedule with notice of only 24 hours or less, the employer could be required to pay the employee a premium, equivalent to one hour of pay. San Francisco, Seattle, New York City, and Emeryville, California have enacted laws to require employers to provide two weeks’ advance notice of schedules to employees in certain large retail and/or food service establishments.

In order to handle predictive scheduling mandates, business owners should explore software options and even retaining outside vendors that provide scheduling and labor management solutions.  A lack of training or understanding of predictive scheduling can be detrimental to a business’ bottom line, and scheduling practices can have a dramatic impact on labor costs.  As with most new legal developments in the food service industry (or any industry for that matter), training and education is key.

 For more information on this and other issues, contact our office at 312-368-0100 or Jon Weis at jweis@lgattorneys.com

 

Will 2 Years of Continued Employment Be Enough in Illinois to Enforce a Non-Compete?

The Answer: It’s Complicated.

In 2013, an Illinois Appellate Court in Fifield v. Premier Dealer Services, Inc., decided that absent additional consideration, continued employment for less than 2 years after the restrictive covenant was signed, would not be sufficient to enforce a restrictive covenant. The Fifield decision was unusual because courts often do not consider the adequacy of the consideration ̶ only that there was consideration to support a contract. Often, the promise of continued employment was acceptable. This decision sent shock waves throughout Illinois and required employers to reevaluate the value they were giving employees when entering into restrictive covenants.

Since that decision, Illinois state courts have routinely followed Fifield and applied its bright line test in cases where there is no additional consideration given to the employee except continued employment.

For example:

• October 31, 2017 – Employee signed a restrictive covenant after working for his employer for nearly 12 years and also served on the company’s board of directors. He announced his resignation and left 6 months later. He was finally removed from the Board a year after signing the restrictive covenant. Upon leaving he started a new business that directly competed with his employer. The Court found that the restrictive covenant was not enforceable because he did not work for at least two years after signing the restrictive covenant.
• June 25, 2015 – Employee worked for employer for more than three years and left. After working for the new employer for one day, the employee asked to come back. As a condition of his return, the employer requested he sign a restrictive covenant. The employee quit 18-months later. The Court held that because he did not work at least two years after executing the restrictive there was not sufficient consideration to support the restrictive covenants.

Complicating matters, however, Federal Courts in Illinois have consistently rejected Fifield’s bright line test and adhered to a more comprehensive fact specific analysis. The Federal Court’s decisions believe that the Illinois Supreme Court would not adopt Fifield’s rigid and bright line test and continue to a support a “totality of the circumstances” review. As a result, it has led to decisions that are at odds with the State courts:

For example:

• October 20, 2017 – Employees left after 13-months of employment, took confidential information, and started working for a competitor. Employees argued that Fifield governed and therefore the restrictive covenants were not enforceable. The Court disagreed and rejected Fifield’s bright line test.

• July 24, 2017 – Employee left after working for employer for nearly ten years. He signed a restrictive covenant 16 months prior to leaving. The Court rejected Fifield’s bright line rule. The Court noted that “[f]ive federal courts in the Northern District of Illinois and one federal court in the Central District of Illinois have predicted that the Illinois Supreme Court will reject the Illinois appellate court’s bright-line rule in favor of a more fact-specific approach.”

What does this mean for employers?

Because all Illinois employers should expect that they will have to enforce these agreements in a state court, the Fifield holding must continue to be respected. Employers should review their restrictive covenants to ensure the agreements are carefully drafted to improve enforceability.

Levin Ginsburg has been working with employers for approximately 40 years to help them protect their businesses. If you have any employment or other business related issues, please contact us at 312-368-0100 or email Walker Lawrence at wlawrence@lgattorneys.com

The Americans with Disabilities Act: Employers Must Engage in the Interactive Process

A recent 7th Circuit Court of Appeals decision emphasizes the steps an employer must take to accommodate an employee with a disability.  The American’s with Disabilities Act (“ADA”) is a federal statute that applies to any employer of 15 or more employees.

In Eymarde Lawler v. Peoria School District No. 150, a teacher (“Lawler”) with PTSD was hired by School District 150 (the “School District”) and worked without incident for 4 years.  Lawler’s PTSD symptoms began to manifest in 2010.  She was initially given a leave of absence, and then transferred to a school for students with emotional and behavioral problems.  Lawler had no prior experience teaching children with severe behavioral problems but never-the-less earned a satisfactory rating after the first year.  The following year, after several stressors in and out of school (including witnessing the aftermath of a shooting and being concussed by a student), Lawler’s psychiatrist opined that the events had retriggered her PTSD and that Lawler should be transferred away from such a stressful environment.

The School District refused the transfer request, instead performing an accelerated review that labeled her job performance unsatisfactory and terminating her.  Lawler sued for, among other things, failure to accommodate her PTSD under the Rehabilitation Act.  The Rehabilitation Act requires the same analysis as the ADA.

Under the ADA, the employer (and the employee) must engage in the “interactive process” to find a reasonable accommodation for the employee’s disability.  After the request from Lawler (supported by a psychiatrist’s professional opinion) for a transfer to a less stressful environment, the school district was required to make a reasonable effort to explore possible accommodations, such as looking for open positions in other schools or reducing the number of students with behavioral or emotional disorders in Lawler’s classroom.

In this case, the facts in the record suggest that the School District made no attempt to look for another position for Lawler.  “The school district simply sat on its hands instead of following-up with Lawler or asking for more information.”  The court vacated the summary judgment award initially granted to the School District and remanded the matter for trial.

It is vital that employers covered by the ADA take employee requests for disability accommodation seriously and explore available options.  By failing to engage in the interactive process, the School District now faces the prospect of liability for failure to accommodate Lawler’s disability.

If you have any questions regarding an employer’s responsibilities or an employee’s rights under the Americans with Disabilities Act, please contact:

Robert Cooper at:

rcooper@lgattorneys.com or (312) 368 0100.

Guidelines for Non-Competition Clauses in Employment Contracts

Employment contracts with non-competition clauses are quite common.  But employers must not go too far in restricting the activities of former employees.  If they do, courts will not enforce the post-employment restrictions.

Recently, an Illinois court struck down covenants in an employment agreement that an employer tried to enforce because the restrictions went beyond what was necessary to protect a legitimate business interest of the employer.

In Assured Partners, Inc. v. Schmitt, 2015 Ill. App. (1st) 141863 decided October 26, 2015, the defendant, Schmitt, had been employed by ProAccess, a subsidiary of Assured Partners, Inc.  After he resigned, his former employer sued him, asking for money damages and an injunction.  The employer lost.

The employment agreement Schmitt signed prohibited him from competing with his former employer “anywhere in the United States or its territories” for a period of 28 months even though he had worked for ProAccess for only 20 months.  It also contained a confidentiality clause prohibiting Schmitt from disclosing any information or observations he made about ProAccess’ business while employed.

The court refused to enforce the non-compete clause because it was too broad saying it prevented Schmitt “from working as a broker, in any capacity, within the entire universe of professional liability insurance business anywhere in this country.”

It also refused to enforce the confidentiality clause because it was far too broad saying, “Illinois views post-employment restrictive covenants that insist on absolute secrecy of any and all information as unreasonable and unenforceable because a person is allowed to make a living, and cannot possibly not utilize any information from his past job.”

Notably, the court did not discuss or consider Fifield v. Premier Dealer Services, Inc., 2013 IL App (1st) 120327, which holds that a minimum of two years of continued employment is necessary to establish adequate consideration for a restrictive covenant.  Given that Schmitt worked for ProAccess for only 20 months (less than two years), the court arguably could have dismissed Schmitt’s claim on the basis that there was insufficient consideration to support the post-employment restrictive covenant.

The takeaway for employment contracts is:

  1. post-employment restrictions should (a) be limited to protecting the legitimate business interests of the employer, and (b) not impose an undue hardship on the employee; and
  2. the time period and geographic area in which the restrictions apply must be reasonable.

To discuss employment contracts or a non-compete issue you have, please contact:

Michael Weissman at:

mweissman@lgattorneys.com or (312) 368-0100

or

Mitchell S. Chaban at:

mchaban@lgattorneys.com or (312) 368-0100

New Cook County Wage Theft Ordinance Applicable to Cook County Employers as of May 1, 2015

On May 1, 2015, employers in Cook County will be subject to the new Cook County Wage Theft Ordinance that imposes harsh penalties on employers who violate federal or state wage laws. The purpose of the Ordinance is to protect employees from wage theft and prohibits companies and individuals found to have violated wage-payment laws from obtaining Cook County procurement contracts, business licenses, or property tax incentives for a period of five years.

An employer will face penalties under the Ordinance if it has admitted guilt or liability, or has been adjudicated guilty or liable in any judicial or administrative proceeding, of committing a repeated or willful violation of the Illinois Wage Payment and Collection Act, the Illinois Minimum Wage Act, the Illinois Worker Adjustment and Retraining Notification Act, the Illinois Employee Classification Act, the federal Fair Labor Standards Act, or any comparable state statute or regulation that governs the payment of wages.

The Ordinance applies not only to business entities, but to any “person”, including a “substantial owner” or an employer. A substantial owner is defined as any person who “owns or holds a 25 percent or more percentage of interest in any business entity seeking a county privilege, including those shareholders, general or limited partners, beneficiaries and principals; except where a business entity is an individual or sole proprietorship, substantial owner means that individual or sole proprietor.”

Penalties under the Ordinance include:

  1. Ineligibility for County Contracts:  The employer will be ineligible to enter into a contract with Cook County for a period of five years from the admission of guilt, date of conviction, entry of a plea, or finding in a judicial or administrative proceeding of a violation of a wage-payment law.
  2. Ineligibility for Property Tax Incentives: The employer will be ineligible to receive any property tax incentives for a period of five years from the admission of guilt, date of conviction, entry of a plea, or finding in a judicial or administrative proceeding of a violation of a wage-payment law.
  3. Ineligibility for a Cook County Business License: The employer will be ineligible to receive a Cook County business license for a period of five years from the admission of guilt, date of conviction, entry of a plea, or finding in a judicial or administrative proceeding of a violation of a wage-payment law.

Employers who are subject to the above listed penalties may request an exception to the applicable period of ineligibility by submitting a written request to the County. Such exceptions may be granted by the County if the County finds that the exception is in the best interest of the County.

Employers in Cook County should review their wage payment policies to ensure that they are in compliance with all applicable federal and state wage-payment laws.

If you have any questions or concerns regarding the Cook County Wage Theft Ordinance or your business’s wage payment policies, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or (312) 368-0100

REMINDER: New Illinois Law Limits an Employer’s Ability to Inquire Into Job Applicant’s Criminal History

The Illinois “Job Opportunities For Qualified Applicants Act”, which took effect on January 1, 2015, prohibits employers from inquiring about or into, considering, or requiring disclosure of the criminal record or criminal history of an applicant on a job application. In passing the Act, the Illinois legislature found that “it is in the public interest to do more to give Illinois employers access to the broadest pool of qualified applicants possible, protect the civil rights of those seeking employment, and ensure that all qualified applicants are properly considered for employment opportunities and are not pre-screened or denied an employment opportunity unnecessarily or unjustly.” The Act applies to all employers with 15 or more employees. The Act specifically excludes three types of employers: (i) employers required by federal or state law to exclude applicants with certain criminal convictions; (ii) employers that require a standard fidelity or equivalent bond where one or more specific criminal convictions would disqualify the applicant; and (iii) employers that employ individuals licensed under the Emergency Medical Services (EMS) Systems Act. An employer may inquire into an applicant’s criminal background only after an applicant has been deemed qualified for the position and notified that he has been selected for an interview, or, if there is not an interview, only after a conditional offer of employment is made to the applicant. Employers that violate the Act are subject to civil penalties imposed by the Illinois Department of Labor. The Act does not, however, create a private cause of action for aggrieved job applicants.

To discuss any questions you may have about the effect of the Job Opportunities for Qualified Applicant Act on your business or how you can revise your employment policies to comply with the Act, please contact:

Kristen E. O’Neill at:

(312) 368-0100 or koneill@lgattorneys.com.

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