Top HR Compliance Mistakes Restaurants Make (and How to Avoid Them)

The restaurant industry is fast-paced, with countless priorities vying for attention: food safety, customer satisfaction, staffing, and profitability. With so much going on, HR compliance can often fall by the wayside. Unfortunately, overlooking it can lead to costly penalties, employee turnover, or even lawsuits.

Here are the top HR compliance mistakes restaurants make—and how to avoid them to keep your business thriving.

Are You Misclassifying Employees?

One of the most common mistakes in the restaurant industry is misclassifying employees. Are your staff members properly classified as exempt or non-exempt? Are you treating tipped employees correctly under wage and hour laws?

For example:

• Servers and bartenders are often non-exempt employees, meaning they’re entitled to overtime pay.

• If you use a tip credit, you must ensure that tipped employees earn at least the federal or state minimum wage when tips are included.

Failure to classify employees correctly can lead to back pay claims and penalties. To stay compliant, regularly review your employee classifications and ensure they align with Fair Labor Standards Act (FLSA) requirements.

Do You Have Accurate Timekeeping Practices?

Restaurants are notorious for scheduling flexibility, but this can lead to compliance problems. Are you accurately tracking employee hours, including overtime? Do you pay employees for all time worked, including preparation, clean-up, and mandatory meetings?

Timekeeping violations, like requiring off-the-clock work or miscalculating overtime, are common in restaurants and can result in wage and hour lawsuits. Invest in reliable time-tracking systems and train managers to enforce timekeeping policies consistently.

Are You Compliant with Break and Meal Period Laws?

Break and meal period regulations vary widely by state, and many restaurant owners overlook these laws entirely. Do you know what’s required in your state? Are employees getting the breaks they’re entitled to, and are those breaks documented?

For example:

• In California, employees must receive a 30-minute unpaid meal break for every five hours worked, along with 10-minute paid rest breaks for every four hours.

• Failing to provide breaks can result in penalties, including additional pay for each missed break.

Stay informed about your state’s specific requirements and ensure managers schedule shifts to accommodate these breaks.

Are You Properly Handling Harassment and Discrimination?

Restaurants often have diverse teams, fast-paced environments, and frequent customer interactions—all of which can create opportunities for workplace harassment or discrimination. Do you have clear anti-harassment policies in place? Do employees feel safe reporting concerns?

Ignoring complaints or failing to train staff on harassment policies can lead to toxic work environments and legal consequences. Provide ongoing training for employees and managers, and establish clear reporting procedures for any issues.

Do You Document Employee Policies and Issues?

How often do you document performance, discipline, or policy updates? Many restaurant owners rely on verbal communication or informal processes, which can lead to misunderstandings or disputes.

For example:

• If an employee claims wrongful termination, do you have documented records of warnings or performance reviews to support your decision?

• Are your policies (like attendance or dress codes) outlined in an employee handbook?

Proper documentation protects your business in the event of disputes and ensures consistent treatment of employees. Consider creating a straightforward handbook that covers key policies, and maintain records of employee interactions.

Are You Prepared for I-9 Audits?

Restaurants often hire seasonal or temporary staff, which can lead to I-9 compliance issues. Are you verifying employee eligibility correctly? Do you complete the I-9 form for every new hire within the required time frame?

Immigration and Customs Enforcement (ICE) has been known to target the restaurant industry for audits. Failing to complete or store I-9s properly can result in steep fines. Regularly audit your I-9 forms and ensure they are accurate, up-to-date, and stored securely.

Do You Understand Local Minimum Wage and Tipping Laws?

Minimum wage laws vary not just by state, but often by city or county. Are you paying employees correctly based on your local laws? If your city has a higher minimum wage than the federal standard, are you accounting for that?

Tipping laws add another layer of complexity. Are you monitoring tip pooling to ensure compliance? Are you reimbursing tipped employees if their tips fall short of the minimum wage?

Stay on top of local wage and hour laws and communicate changes to employees to avoid confusion or disputes.

Are You Providing the Right Training?

Compliance often comes down to education. Have you trained your managers and staff on HR basics, including anti-harassment, timekeeping, and workplace safety? Do your managers understand labor laws enough to avoid costly mistakes?

Training isn’t just about checking a box; it’s about creating a well-informed team that can prevent compliance errors before they happen. Many restaurants benefit from annual compliance reviews and training sessions tailored to their unique needs.

How Can Restaurants Avoid These Mistakes?

Avoiding these common HR pitfalls requires a proactive approach. Start by assessing your current HR practices:

• Are your policies clear, consistent, and documented?

• Do you regularly review compliance with state and federal laws?

• Are you investing in the right tools, like time-tracking software, to streamline processes?

If you’re unsure where to start, Peopleish can help. We specialize in providing tailored HR solutions for small businesses, including restaurants. From crafting employee handbooks to conducting compliance audits, we’ll ensure your business is set up for success.

Protect Your Business, Support Your Team

Running a restaurant is hard enough without worrying about HR compliance mistakes. By addressing these common pitfalls, you can protect your business from legal risks, foster a positive workplace culture, and focus on what you do best—serving your customers.

Don’t let HR compliance be the ingredient you forget. Reach out for expert guidance, and keep your business running smoothly from the kitchen to the front of house.