Serving Up Compliance — Managing Pay Transparency Requirements in the Restaurant Industry

Transcript

Laura A. Mitchell
Principal, Denver

Welcome to another installment of our pay transparency series, where we're talking to attorneys across the firm about what they're seeing and how they're helping their clients with pay transparency needs. I'm here today with Melisa Panagakos, who joins me in our Denver office. Melissa and I have been colleagues for years, so we get to talk a lot about pay. Melissa is one of the leaders in our restaurant industry group, which is a really active, very busy group within JL.

Melisa, first welcome. I'm excited to kick this off with you. Why don't you just spend a moment and tell us what you do in the Restaurant Group, and how we're able here at JL to help our clients in this space?

Melisa Panagakos
Principal, Denver

Thanks for having me. The restaurant industry is unique in the employment law context in that it typically has a really high turnover of its team members, and it often deals with a younger population of team members in entry-level roles. You definitely get lifers who stay in the restaurant for a long time, but those who are applying are often high school or college-age individuals. Then, there are also a lot of compliance issues that restaurants are facing, from food safety to the age of employees and wage and hour issues, states that require meal and rest breaks, et cetera. All of that is really hard to navigate in the restaurant industry because restaurants run so independently. Even the national chains, the individual operations do their thing every day. As much as national corporate entities might try to implement practices to stay in compliance, it's often very challenging to ensure those practices are followed. It's a unique workspace.

Our JL restaurant industry team does a lot of wage and hour work for our restaurant clients, whether it's overtime, meal and rest breaks, proper minimum wage, tip credit issues, all of those are always very active. We also handle a lot of EEO management, including discrimination claims and ADA leave management, which is really hard in the restaurant workspace because people showing up to work is crucial. If a restaurant is short-staffed, that impacts the restaurant substantially. There's a wide range of support that we offer our restaurant clients, and it's always active and very fun. Restaurants are really fun clients. The relationships are awesome, and it's fun to get to go around town and say, " that's my client,” when you see one of your favorite restaurants.

Mitchell

Some of those themes that you hit on are very prominent within the pay transparency spaces as well. This notion of a nationwide employer raises compliance issues, but you have these restaurants and locations that operate as their own little ecosystem. As we talk about pay transparency today, what are you still seeing and hearing from your clients that remain challenges? Obviously, we're in Colorado. We've been talking about pay transparency for quite some time, but I imagine it's still difficult for these restaurants and locations to comply with all the changing laws here in Colorado and nationwide.

Panagakos

Absolutely. The most challenging thing that our nationwide restaurant clients are facing is the patchwork of laws across the board, and understanding if we can't be in 100% in compliance with every state immediately, what is the priority level and risk level that they should be focusing on? Which state has the highest risk of the most serious damages if they're not in compliance, so that they know to get an order in that state first? Then, from there, it's a little bit of a waterfall down to the least risky states that they're dealing with. It's been up to us to really educate those national clients, like, if you have restaurants in Washington, we need to make sure you're in compliance because Washington has a private right of action, and every violation can lead to an individual challenge in court or class-wide challenges in court. The assessment in Washington, for example, is based on every person who could have applied for a role. If the pay transparency requirements weren't met in that state, that's a lot of people who could have applied for a given role for any given job posting. I would say that risk assessment from state to state is crucial.

Then, also dealing with the actual implementation of those compliance practices. Someone at corporate can walk down the hallway and say, recruiter, make sure our job posting includes this pay range. Well, that recruiter might say, our job posting does, but then if that gets posted on LinkedIn, maybe when Monster or Indeed scopes out the LinkedIn posts, they forget to put the pay range on it. In that case, in a state like Washington, the restaurant would still be liable for the pay transparency violation. Ensuring compliance remains intact from start to finish is also a challenge. We've also had restaurants that decide to pull applications from a place like Indeed or Monster, which didn't have the compliant posting and then go through a feed-out process that was not necessarily in compliance either with other regulations, just because that's faster for them to do, or they have employees facilitating management interviews. It's all done at the restaurant level at the end of the day, too. It's very hard to ensure compliance goes from start to finish.

Mitchell

It’s probably exacerbated by what you talked about at the beginning, that these are high-turnover jobs. They have evergreen postings where the job is just posted all the time. Compliance deficiencies permeate and have a longer time horizon than something that's easily filled or that’s not posted as often. The nature of the restaurant industry and the types of jobs that they're hiring for on a regular basis exacerbate the difficulties from the compliance aspect.

Panagakos

Absolutely. Those evergreen positions allow applicants to come in at any point in time. However, it also allows that job posting to sit in the back seat of our clients’ heads. That's not something that is front of mind. Even just preparing for this podcast, I have three wage and hour class action cases right now with restaurant clients that I'm managing, and I haven't even talked to them about their job postings because we're trying to figure out if they're doing meal and rest breaks properly and how we're going to defend these huge class actions on those issues. It is very easy for something like this to get put on the back burner when restaurants are facing risk in other places, which again goes back to our due diligence. Telling them, this is where it's really risky, even as risky, if not more so, as your meal and rest break issue like in Washington. This is actually going to cost you a lot more money than even a challenge on those issues. They do really rely on us to keep them apprised of that risk assessment across the board.

Mitchell

It would seem that a good proactive self-auditing practice would be helpful in those situations. To your point again earlier, how do you do that if you are a nationwide organization that has local locations? How do you structure an efficient and effective auditing practice so that you can get in and find out who's complying, who's not, what needs to be tweaked, and where you do have that risk? Do you have any thoughts or suggestions around that?

Panagakos

We're doing that for one of our nationwide clients right now, who did get hit in Washington. We started with Washington in terms of the audit, so the audit is going to go state by state. I'll be frank with you, efficiency is not necessarily a very achievable goal in that audit, and that's OK. We're doing it, and we're working on the riskiest states first. We started in Washington. We ensured the postings were compliant. 

Then, in a couple of months, once we have ensured our side is compliant, we will conduct spot audits. Go to Monster, Indeed, and third-party vendors that scrub positions from the vendors we actually certify and go to ourselves, by which I mean the restaurant. We make sure that compliance is translated all the way through to the end of those postings. We would do an audit and have a team that goes in and searches for all the job postings in a certain area that show up for that client, and then can say, " this site is doing it correctly, but this site is not. You need to get in touch with them and either have them take down the posting or revise it. We would start with, say, 70% compliance and then wait a few months before doing the audit again. We got to 100 % compliance. That process probably took six months for us to go from start to finish. That's the first state. 

Then we move on to the second state, and figure out what is compliant in that state and then do the same thing. Initiate compliance from corporate and the recruiting team, and then do audits to ensure that transitions all the way to the end result that Joe Smith might be getting when he Googles jobs at restaurant B for servers.

Mitchell

Not unlike other compliance rollouts and monitoring within an organization that is structured like this. That makes a whole lot of sense. One thing that I was thinking about that is probably unique to the restaurant industry, as we come to an end on our podcast, is this notion of tipping. That is a component of pay that is not present in a lot of our clients’ industries.

In the pay transparency space, that can be really nuanced as to how you disclose that. Do you include it in the range? It can be an attractive benefit to say, you're going to get all of this additional potential earnings, but also we want to be compliant, and we don't want to overstate. I'm assuming, and correct me if I'm wrong, this is something that has come up in our advice and counsel to restaurant clients, as to what to do with a tipped position, and to ensure that you are compliant with our pay transparency laws?

Panagakos

That's exactly right. You hit on a key point in the restaurant industry: they want to disclose tips as part of pay because it is their best recruiting tool. Many restaurants, especially our higher-end restaurants, which we have many here in Denver, are paying the tipped minimum wage. However, people are going home making 70, 80, or 90 dollars an hour from tips. Those restaurants want to say this is how much you could make if you come to work here. Don't go work at your neighborhood chain restaurant; come work at this Michelin-star restaurant and make so much more money. That said, the restaurant cannot guarantee those tips. 

When disclosing a pay range under these pay transparency laws, you have to disclose the bottom as being that tipped minimum wage. You know that no matter what, you will get that server or whoever the job is posted for, if it's a tipped employee to full minimum wage with tips, or if without tips, the restaurant will cover the difference. However, the number that is on that job posting has to be the tipped minimum wage, if that is what we pay, with a little asterisk that says plus tips. Now, you can say tips can get you from X to Z, but our pay starts at this level. Our direct pay is at this minimum wage level. We get a lot of pushback on that because that doesn't necessarily help with their recruitment efforts.

Mitchell

Right, a lot of employers look at their job description not as a compliance exercise, but really as an advertisement. They're trying to entice the best candidates to apply for their role and not, like you said, to go to somebody else. It's all fascinating to me. Really, this highlights the interplay between pay transparency and the wage and hour laws for this industry specifically. I don't think that's the case for all of the industries, but certainly for the restaurant group. You guys spend so much of your time working through the wage and hour issues that they really do go hand in hand – I don't think that you can separate them. I appreciated you highlighting that for us. Thank you.

Panagakos

Absolutely. It's always a challenge with compliance, and for all those restaurant clients out there, you're never going to get it 100%. We're here to help you get as close as possible

Mitchell

Exactly. Melissa, thank you so much. This has been a great conversation. I hope we get the opportunity to do it again soon. Thank you, everyone, for joining us, and stay tuned for our next installment.