In many locales, labor laws for the service industry severely limit the number of hours that non-exempt employees can work. The laws define the limits according to the industry, age, job position, hourly rate, holiday, length of shift, or even the day of the week. If your business works with service unions, these rules can become even more complicated. For example, the rules may require that managers track breaks and meal periods and whether employees wanted to take their break. Some states and insurance companies perform regular Labor & Industries audits, imposing heavy fines or insurance premium increases for non-compliant businesses. In this post, we cover some example scenarios that show how ignoring labor regulations is a bad idea.
Consequences of Ignoring Labor Regulations
Labor & Industries (L&I) audits are common in some US states, especially CA, WA, OR, and NY. Businesses hit hardest include those in the restaurant, food service, retail, construction, and hospitality-related industries. Typically, state or insurance companies perform the audits to verify that the business has complied with all applicable regulations. Audits focus on unpaid overtime, minors working too late/early, undocumented break and meal periods, and other violations. Rule infractions can be punished with stiff fines and/or insurance premium increases.
Example 1: Sandwich Restaurant Ignores Overtime Laws
A sandwich restaurant in California employs three sandwich specialists. These team members are scheduled to work less than 8 hours a day, six days of the upcoming work week. On the first day of the schedule, an employee fails to show up for work. Management terminates this employee. The remaining two employees must work work the additional 28 hours at the business to cover the terminated employee. Neither employee receives a day off during the work week.
Under California overtime law, each employee must be paid 1.5x for more than 8 hours of work in a given day, as well as 1.5x for more than 40 hours per work week. Additionally, the two sandwich specialists will receive 1.5x, 2.0x overtime on the 7th day of their work week, as neither employee will receive a break this week. Failing to pay these increased wages is grounds for a lawsuit and an investigation by the state.
The outcome? Insufficient staffing may cost this California business several thousand dollars in a single week! And that’s not even counting any court fees and fines resulting from a lawsuit.
Example 2: Car Wash Ignores Laws Concerning Meal Periods and Minors
The general manager at a car wash business needs to ensure that one manager is always on duty. They also need to staff a number of attendants to apply soap to the cars before the vehicles enter the automated car wash machinery. Each attendant must receive a number of breaks during their shift, and this particular business prefers to hire employees who are minors to fill gaps in the schedule. During a normal work day, between five and seven employees are working.
By not carefully scheduling the break and meal periods and minor rules, the manager may end up with a shortage of staff as multiple employees take breaks (or leave for the day) at the same time and minor employees leave for home.
During the labor shortage, customers will not be serviced appropriately and may leave poor reviews about the business. Alternatively, the manager may choose not to send employees home or allow breaks to proceed; but doing so is grounds for heavy fines, a lawsuit, and/or increased insurance premiums.
Managers Need to Stay on Top of the Rules to Stay Out of Hot Water
Careful managers schedule around these oft changing and complex rules, ensuring that their business is meeting labor regulations. However, businesses inadvertently land themselves in hot water when workers fail to show up, quit, or lose their jobs for otherwise legitimate reasons. Inexperienced managers, overburdened by other areas of schedule creation, often forget about labor laws. The main reason they forget? The rules aren’t core to the “making money” aspect of their business. Stiff fines and lawsuits result from failing to be in compliance.
In uncertain economic times, managers must be able to schedule labor correctly in a consistent manner. They must also keep employees happy and reduce fines imposed by legislative authorities, such as the Department of Labor. Businesses should seek to use cost-effective software systems, such as TimeForge, to ensure proper scheduling and timekeeping. Effective scheduling software can schedule meal and break periods, accurately calculate overtime costs, and archive previous schedules for managerial review.
Ignoring Labor Regulations Isn’t An Option
The takeaway here is that ignoring labor regulations isn’t an option if you want to stay in business. Make sure that all employees are aware of the applicable laws for your city or state. Follow federal rules, corporate rules, and insurance regulations (if applicable). Where possible, utilize an automated scheduling system to enforce these rules. This, in turn, reduces the administrative burden placed on managers, thereby allowing management to work on other pressing issues such as training, customer service, and management tasks which cannot be automated.