Chapter 20 — Exercises

Employment Law and Compliance: Wage and Hour, the Tip Credit, Overtime, and Harassment

Items marked † have worked solutions in the answers appendix. Odd-numbered items are also worked there.

A standing note for every item in this set. Every wage figure, tax rate, and premium in these exercises is an illustrative teaching number, not a current legal threshold anywhere. Minimum wages, tipped wages, exempt salary thresholds, tip rules, and scheduling ordinances vary by state, county, and city and change on their own schedules. Nothing here is legal advice. In practice you verify locally and you use an employment attorney.

A. Recall and definitions

20.1 State the three things the Fair Labor Standards Act requires of a restaurant employer. Which of the three decides the most disputes, and why?

20.2 Define workweek in the FLSA sense. A prep cook works 30 hours one week and 50 the next. How many overtime hours are owed, and why is "they averaged forty" not a defense?

20.3 In one sentence each, distinguish tip pooling from tip sharing.

20.4 † List the four conditions an employer must generally satisfy to claim a tip credit. Which one, if missed, disallows the credit entirely — and what does the employer then owe?

20.5 Name the three tests for exempt status. Which one does a working sous chef most often fail, and which one can no book answer for you?

20.6 What is the regular rate of pay, and name two things that go into it that are not the stated hourly wage.

20.7 Explain the difference between a service charge and a gratuity in terms of (a) who owns the money, (b) sales tax, and (c) the regular rate.

20.8 Who is barred from participating in a tip pool, and did the 2018 federal tip provisions make that bar depend on whether the employer takes a tip credit?

B. Applied reasoning

20.9 A manager tells a cook, "Do not work off the clock — it's against policy," and then walks past that cook finishing the prep list at 11:20 p.m. after a 10:52 punch-out. Is the time compensable? Explain the standard that governs, and explain why a written policy is necessary but not sufficient.

20.10 † Your assistant manager takes three points in the Saturday tip pool "because they work the floor like everyone else." Identify the two distinct legal problems this creates and explain why each one is evidence for the other.

20.11 A restaurant's payroll system computes overtime for tipped employees as 1.5 × the cash wage. The error is \$2.25 an hour and it has been in place since the restaurant opened. Explain why a \$2.25 error is more dangerous than a \$225 one.

20.12 Bellwether's servers do two hours of pre-shift setup. Give three different lawful ways to handle those hours, and state one operational cost of each.

20.13 Chapter 19's Friday: the grill cook no-shows at 3:40 p.m. and the manager calls someone in, extends someone else, and cuts a third person early. In a jurisdiction with a predictive-scheduling ordinance, what has just happened? What is the actual cost — the premiums, or something else?

20.14 † A restaurant with a Tuesday-through-Saturday dinner service and weekend brunch discovers that a ten-hour rest rule catches both weekend clopen pairs every week. Explain why paying the premium is the wrong answer, and describe a roster change that would fix it structurally.

20.15 Your GM says the restaurant is too small for Title VII because "we're just thirty-one people." Correct them, and then explain why the correction is not the end of the analysis.

20.16 A server reports that a guest has been touching her. The manager says, "Give it twenty more minutes, they're almost done." Name the legal exposure, the retention exposure, and the cultural exposure created by that sentence.

C. Compute this

Show your arithmetic. Every one of these foots.

20.17 A sous chef is salaried at \$52,000 and consistently works 52 hours a week. If the position is non-exempt and the salary is intended to compensate a forty-hour workweek, compute the regular rate, the overtime rate, the weekly overtime owed, and the annual overtime owed. Then verify your answer using the 3.75% rule of thumb from §20.5.

20.18 † Illustrative jurisdiction: \$11.00 general minimum, \$6.50 tipped cash wage. A server works 27 hours and receives \$118 in tips. Does the employer owe a makeup payment? Show the test and the amount.

20.19 Same jurisdiction. The same server works 47 hours in a holiday week. Compute the cash wages owed. Then compute what a payroll system would produce if it took 1.5 × the cash wage, and state the size of the error.

20.20 † A bartender paid \$14.00/hr works 46 hours in an event week and receives a \$210.00 service-charge distribution. Compute the regular rate, the overtime premium owed, and the total due. Then compute what an employer produces by treating the \$210 as a tip, and state the underpayment.

20.21 A tip pool of \$1,700 is distributed on a points model: 5 servers at 10 points, 2 bartenders at 8, 3 bussers at 5, 1 host at 4. Compute the point value and each position's payout, and confirm the distribution sums to the pool.

20.22 † Take the pool in 20.21 and add 3 line cooks at 4 points and 1 dishwasher at 3 points. Recompute. By how much does a server's payout fall? What must be true about the employer's wage model before this pool is lawful, and roughly what does that cost the employer per tipped hour?

20.23 Three cooks at \$19.00/hr each work 18 minutes past clock-out, five nights a week. All of the time falls above forty hours. Compute the weekly unpaid wages, the annual figure, and the illustrative two-year exposure assuming liquidated damages equal to the unpaid wages.

20.24 † A payroll system auto-deducts 30 minutes from every shift over six hours. The restaurant runs about 140 shifts a week at a blended all-in rate of \$17.00. Assume the break is genuinely never taken. Compute the annual exposure. Then explain, in two sentences, why this particular error produces class-wide claims rather than individual ones.

20.25 A 60-person private event is priced at \$78 per person with a 22% service charge, in a jurisdiction with an 8% sales tax that applies to service charges. Build the invoice. Then build the same event as a guest-determined 22% gratuity. How much more does the guest pay under the service charge, and where does every cent of the difference come from?

20.26 † Continue 20.25. The house distributes the entire service charge to event staff as wages. Compute the employer's total cost of that distribution, including FICA at 7.65% and workers' compensation at \$2.41 per \$100 of payroll. Express the burden as a percentage of the face amount.

20.27 A restaurant carries 480 tipped hours a week in a jurisdiction permitting a \$3.75 tip credit. Compute the annual value of the credit. Then state what the employer owes if the required tip-credit notice was never given, for a two-year lookback, with and without liquidated damages.

D. Read the record and find the violation

20.28 Here is one workweek from a payroll register. Find every problem and say what each one would cost to fix now versus later.

  WORKWEEK: Mon 3/10 – Sun 3/16          [constructed teaching example]

  EMPLOYEE          ROLE          RATE      HRS     GROSS      NOTES
  A                 Server        $6.50    38.50   $250.25     tips reported $391
  B                 Server        $6.50    41.25   $268.13     tips reported $402
  C                 Line cook    $19.00    44.00   $836.00
  D                 Sous chef    salary    57.00   $923.08     exempt
  E                 Asst mgr     salary    61.00   $884.62     exempt; 4 tip-pool points
  F                 Dish         $16.00    39.50   $632.00     30 min auto-deducted × 5
  G                 "Contractor"     —     12.00   $180.00     1099 — Sunday prep

(Illustrative jurisdiction: \$11.00 minimum, \$6.50 tipped cash wage, \$4.50 maximum credit.)

20.29 From the register in 20.28, compute what employee C was actually paid versus what is owed, and state the dollar shortfall.

20.30 From the same register, employee B crossed forty hours. Compute the correct cash wages for the week and compare them to the \$268.13 shown.

E. Write it

20.31 Write the tip-credit notice you would hand a new server on their first day, in plain English, on one page. It must state the cash wage, the credit claimed, that the credit cannot exceed tips actually received, that the employee keeps their tips except for the valid pool, and that the credit does not apply unless the employee has been informed. Add a signature block. (Then write one sentence about why this document should be reviewed by an attorney before it is used.)

20.32 Write the table-transfer policy from §20.8 as it would appear in an employee handbook — under 150 words — plus the two sentences a manager says to the staff at the pre-shift meeting on the day it takes effect.

20.33 A departing server emails: "I was never paid for the two hours of setup before every shift at the full minimum, and I want to talk about it." Write the internal note you send to the owner and the attorney the same afternoon: what you know, what you do not know, what you are preserving, and what you are not going to do. (You are not writing a response to the server. You are writing the first three steps.)

F. Judgment

20.34 † Your labor line is \$70,461 over plan. Your bookkeeper suggests enabling the 30-minute auto-deduction because "everybody does it and legally we're supposed to give them a break anyway." Write your answer, in the form you would actually say it, and include the arithmetic that makes the argument for you.

20.35 Your sous chef, told they are being reclassified as non-exempt and will now punch a clock, says it feels like a demotion — they have been a "salaried chef" for six years and the title matters. How do you handle this conversation without (a) misrepresenting the law, (b) making them feel diminished, or (c) creating a record that undercuts the classification you just made?

20.36 An investor reviewing the plan says the compliance addendum is "over-lawyered for a thirty-one-person restaurant" and asks you to cut the attorney line item. Make the case for keeping it in under 200 words, using numbers from this chapter.

G. Business Plan extension

20.37 Build the wage model table for your own concept: every position, headcount, pay basis, classification, tipped status, and tip-pool participation. For every position you mark exempt, write one sentence defending it against the duties test — and if you cannot write that sentence, change the classification.

20.38 Run the tip-credit decision for your address. Find out (a) whether your state permits a credit, (b) what the general and tipped minimums are, (c) whether your city sets a higher figure, and (d) what notice your state requires. Then compute what the credit is worth annually against your own projected tipped hours — or write the sentence explaining why it is worth zero.

20.39 Write the open questions section of your compliance addendum: five things you do not yet know, who has to answer each one, and what it would cost you to be wrong about it.

20.40 Price your compliance program as a pre-opening and annual line item: attorney review, handbook, timekeeping configuration with multiple rate codes, harassment training, required posters, and EPLI. Then put that number next to the two-year exposure column in the §20.6 table and write the one-sentence conclusion.