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 firstname.lastname@example.org or 312-368-0100.
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.
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 email@example.com
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.
• 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:
• 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.”
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 firstname.lastname@example.org
On Jan. 1, 2017, amendments to the Illinois Right to Privacy in the Workplace Act (IRPWA) took effect expanding the protections of IRPWA to prevent employers from insisting on access to any employee’s “personal online accounts.” The broadened definition of “personal online accounts” now includes all “online accounts” “used by a person primarily for their personal purposes.” The IRPWA previously contained a narrower definition of the type of protected accounts and only prevented employers from seeking access to “social networking websites,” such as Facebook.
The amendments to IRPWA prohibit an employer or prospective employer from attempting to access employee social media accounts. The amendments state that employers cannot “request, require or coerce” an employee to: provide a username or password to any personal online account; authenticate or access a personal account in the presence of the employer; invite the employer to join a group affiliated with any personal account; or join an online account established by the employer. The amendments also widened the parameters of what constitutes a “personal online account,” which IRPWA now defines as any online account primarily used for personal purposes. Employers may still inquire about business and professional online accounts.
The IRPWA amendments do not prohibit employers from making inquiries regarding personal online accounts in certain limited circumstances, including to assure compliance with federal and Illinois law and to investigate an allegation based on specific information that alleges a violation of law.
Employers who violate IRPWA are subject to civil damages, including up to $500 per affected employee plus costs, attorneys’ fees, and actual damages, for willful and knowing violations. Further, any employer or prospective employer or its agent who violates IRPWA is guilty of a petty offense.
If you have any questions regarding this or any other employment related matter, please contact:
email@example.com or 312-368-0100.