California Labor Laws Cheat Sheet for Restaurants

On top of managing staff, inventory, and customer satisfaction, restaurant managers in California face a very real, pressing, and potentially costly issue every single day – complying with California overtime law and other 2019 California labor laws.

11% of California’s jobs are in the foodservice industry, so while it’s understandable why there are so many laws and regulations in place, that doesn’t make it any easier for restaurant managers and owners who need to learn and adhere to all of these rules. And the scary part? Failing to comply with California’s 2019 restaurant labor laws – particularly California overtime law – can cost your restaurant millions.

Let's look at a few examples:

• In May 2019, a San Diego restaurant was forced to pay nearly $30,000 in back pay for not properly compensating two chef's overtime pay.
• In June 2018, seven Bay Area restaurants collectively faced a fine in excess of $10 million for the same reason.
• In January 2019, two restaurant owners saw $1.7 million worth of assets seized to compensate employees for underpayment, tip theft, and lack of medical coverage.

Whether these injustices to workers are intentional or not, these situations cause tension in the restaurant and create a bad name for your brand, which could cause potential workers and customers to shy away from your restaurant.

To help keep you away from a sticky situation, we’ve compiled a list of the need-to-know restaurant labor laws for the state of California so that you can ensure your staff is properly treated and your finances stay stable.

Employee Pay Regulations

Minimum Wage

Californa's minimum wage is $11 for businesses with fewer than 25 employees and $12 with 26 employees or more. It’s important to note that you’ll need to pay this wage regardless of the role tips play in the employee’s pay structure.

Be sure to double check your local minimum wage, as this supersedes the state’s minimum wage if it’s higher. Some parts of the state – like San Francisco – requires a $15 minimum wage for all roles (again, yes, including servers).

Overtime

In California, employees are entitiles to at least 1.5X their regular rate of pay if they work:

• More than eight hours in any workday
• More than 40 hours in any workweek
• More than six days in any workweek

When employees work overtime, they must be paid at least:

• One and one-half times the employee's regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek.
• Double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

This can get a bit confusing. Basically, California’s restaurant 1.5X overtime pay regulation kicks in if employees work more than 40 hours per week or if they work more than eight hours in one day. However, If employees work six days straight and then more than eight hours on the seventh consecutive day, or if they work more than 12 hours in one day, they are owed 2X their regular rate of pay.

A couple more quick notes on overtime:

• Employees cannot waive their right to overtime pay. They are owed what they worked for.
• You do owe employees for overtime pay even if you did not authorize the shift, so consider using a software like 7shifts, which alerts managers when employees are nearing overtime eligibility on schedules.
• Salaried employees are still eligible for overtime unless they earn at or above 2X the state’s applicable minimum wage. In that case, these employees are considered exempt employees in the eyes of California.
• Don’t forget to take into account if your employee works overtime at two of your restaurants. For example, if an employee works 25 hours at both of your restaurant locations, you owe that employee 40 hours at the normal rate and 10 hours at the overtime rate.

Overtime is one of the stickier laws to deal with. When you need your staff, you need them. But there are a few ways to see if you can save money. For example, you could conduct a cost analysis to see if it’s more cost-effective to hire more staff to work fewer hours per week rather than having a few team members work overtime.

Tipping Laws

Under California law, tips belong to front-of-house staff and must be paid fully to them.

• Tip Pooling is legal, but must be done fairly. Make sure you have a clearly developed and documented process for tip pooling, (for example: 85% to servers, 10% to bussers, and 5% to bartenders) and use tip pooling tools to help.
• Managers and Owners taking servers’ gratuities is illegal, so don’t get caught with your hand in the tip jar.
• Credit Card Processing Fees on tips must be paid by the restaurant under California law. So, if a credit card company charges $0.15 + 3% to process the payment, your restaurant must pay that amount to ensure the server gets his or her full tip amount.

Use Tip Pooling Software to easily manage employee tip pools and make sure your team gets paid the right time, every time.

Recommended Reading: [Updated for 2023] The State-by-State Guide To Tip Pooling Laws

Split Shift Fees

Split shifts are a great way to lower labor costs during slower parts of the day, but they still cost you. If you send an employee home between shifts, that employee is entitled to a premium pay of one hour at the state or local minimum wage (whichever is higher).

This means that if you schedule an employee who works for the current minimum wage of $11 for two three hour shifts, you owe that employee $77 (6 x $11 + the $11 premium).

However, if that employee makes more than minimum wage, you may not have to pay the premium. Say you schedule a cook making $14 ($3 above the minimum wage) for the same shift as above. That employee’s pay for the day would be $84 (6 x $14), which is above the minimum pay required for this split shift ($77). As such, this employee would not be entitled to a premium under California law.

So, if you decided to schedule employees for split shifts, consider asking the more skilled employees to work them. They’ve likely earned their higher wages and can produce more for the restaurant, and you won’t be spending any money on premium pay

Payday Schedule

Restaurants must establish and stick to a routine pay schedule.

• If you pay employees bi-weekly, they must receive owed wages within seven days of the last day of the period. For example, if your pay period covers March 8 - March 21, payment must be given by the 28th.
• If you pay employees twice a month, they must receive owed wages within ten days of the last day of the period. Therefore, workers must receive pay for work done between the 1st and 15th of the month by the 25th, and ten days after the last day of each month for the time between the 16th and the last day of the month.

Employee Break and Benefit Regulations

Shift Break Laws

Restaurant employees are entitled to:

• A 10-minute paid rest break for every four hours of work, starting at 3.5 hours worked.
• A 30-minute unpaid meal break for every five hours worked.

These breaks must be offered to employees, with the laws surrounding meal breaks laid out in California Labor Code 512. However, Code 512 also specifies that employees and employers can mutually agree to a meal break waiver if:

• The employee is working six hours or less.
• The employee is working 12 hours or less and took the first meal break.
  Note: in this circumstance, only one meal break may be waived, but the employee is still eligible for both

Time Off Laws

Vacation Time

Paid (or unpaid) vacation is not required to be provided to employees under California law. However, this can be a point of concern to your restaurant staff. Paid vacation is a valuable perk in the restaurant industry, so offering it to your employees will help you attract and retain some of the best talent in California. However, given the industry's thin margins, this benefit isn't feasible for all restaurants. For these businesses, work with employees to manage their schedules and time off requests a few weeks in advance. This way, you'll be more likely to get coverage for all of your shifts, encourage your employees to take personal time, and ensure you're keeping your restaurant staffed by satisfied, well-rested employees who feel appreciated.

Recommended Download: Free Restaurant Staff Availability Excel Template

Sick Time

California restaurant employees are entitled to paid sick leave under the California Healthy Workplaces, Healthy Families Act of 2014. Sick time is accrued at one hour for every 30 hour worked, including overtime.

Restaurateurs are legally able to place certain restrictions on the use of paid sick leave. For example, they are allowed to not pay for sick leave until 90 days after an employee’s first day. Additionally, restaurateurs are allowed to cap employee paid sick leave at 24 hours per year – regardless of hours worked. So, even if an employee accrues 40 hours of sick time over the course of a year, a policy can legally be put in place to restrict that employee's maximum payable sick time to 24 hours.

However, “employees must be permitted to use paid leave for the diagnosis, care, or treatment of an existing health condition of, or preventative care” for themselves or a family member.

Holiday Time Off

California law does not require any business to provide time off for any holiday, nor for it to pay employees a premium holiday or overtime rate (unless the hours worked during the holiday qualify as normal overtime).
So, in the eyes of the law (though certainly not for your employees), holidays are just like every other work day.

Jury Duty

Restaurants are required to give employees time off for jury duty, but they are not legally required to pay employees during their jury service. Additionally, restaurants cannot penalize or fire employees who appear for their summons.

Jury duty can last anywhere from one hour to one year, the latter being a rather rare circumstance. That said, to keep employees satisfied, see if they would be willing to fit in extra shifts in the weeks preceding their service so they don’t lose out on too much pay, while providing extra shift opportunities to those who take shorter shifts in the weeks prior to better accommodate the juror.

Voting Leave

California employers are required to allow employees to take time off to vote in elections. However, “No more than two hours of the time taken off for voting shall be without loss of pay,” and “the time off for voting shall be only at the beginning or end of the regular working shift.” Additionally, employees need to provide at least three days notice if they plan to take time off to vote, and employers must post notice of employee voting rights at least ten days prior to an election.

Processes to Follow

Posting Schedules

Employers are required to post employee schedules two weeks in advance, and can face a fine of 1-2 hours of employees’ rate of pay if the change is made without legitimate reason as outlined by law. These reasons are:

• If another employee previously scheduled is unable to make his or her scheduled shift resulting from sick or vacation time with less than seven days’ notice to the employer.
• If another employee previously scheduled doesn’t come to work, has his or her employment terminated, or is sent away early for disciplinary reasons.
• If an employer asks the employee to work overtime.
• If the employee initiates the schedule change himself or herself.
• If the change is a result of certain acts beyond the employer’s control.

Scheduling takes up an enormous amount of time for restaurateurs, who then have to juggle countless shift swap requests. One solution for this is a scheduling software like 7shifts, which ensures compliance in this area by posting schedules online for employees to access. Employees can communicate with each other and coordinate shift swaps between themselves so you don’t have to lose any more sleep (or money) over scheduling.

Recommended Reading: Shift Schedules: The Ultimate How-To Guide

Employment Records

California requires businesses to keep records of all employees for three years. Records should show the employee’s:

• Name
• Home address
• Job title
• Last four digits of his or her Social Security number
• Birthday (if under 18)
• Total hours worked and wages paid in each pay period

While this seems like a chore, it can be immensely helpful if you are faced with litigation. For instance, these records can prove whether or not an employee has grounds for overtime back pay.

Charging Your Employees

Restaurants cannot force employees to pay for their uniforms or pay to maintain them. However, restaurants can require employees to pay for more general apparel. For example, if you require waiters to wear a tie, they can cover that cost themselves. However, if you require cooks to wear chef hats with your restaurant logo on it, you must provide those.

Additionally, employees cannot be held responsible for register shortages or customer walk-outs unless the shortage is a result of a “dishonest or willful act, or by the gross negligence of the employee.”

Classifying Your Employees

Calling your full-time employees independent contractors may seem like a good way to save money – but it’s actually not. Misclassifying your employees as independent contractors in California can result in fines of $5,000-25,000 per violation in addition to unpaid payroll taxes.

Understanding employee classification is a huge part of grasping California labor laws’ exempt employees as well. Independent contractors fall under the category of exempt employees, in addition to employees whose hourly rate of pay is greater than or equal to 2x the hourly minimum wage. It’s worth noting that exempt employees may not be eligible for overtime or the breaks that non-exempt employees are, which is why falsely classifying employees as exempt independent contractors can create an issue. Make sure you’re classifying your employees correctly and noting whether or not they are exempt.

Health & Safety Laws

Keeping your employees safe is an often overlooked part of California labor laws. The Department of Industrial Relations notes that California restaurant employers are often cited for violating various health and safety regulations, including:

• Keeping the floors and platforms free from danger, obstruction, and – reasonably – oil, grease, and water.
• Establishing a written Injury and Illness Prevention Program and Hazard Communication Program.
• Making first-aid kits available.
• Failing to provide proper equipment or necessary protective clothing.

Payroll Tax

California requires four types of payroll taxes to be paid:

• Unemployment Insurance Tax (Paid by Employer)
• Employment Training Tax (Paid by Employer)
• State Disability Insurance Tax (Deducted from Employee Wages)
• California Personal Income Tax (Withheld from Employee Wages)

Strengthening Compliance with Technology

Yup – that’s a lot of labor laws. That’s why 7shifts has developed solutions to help California restaurants reduce the risk surrounding restaurant labor laws in the state and adhere to California’s labor compliance. Here are two that we’re particularly proud of.

Built-in Compliance Tools

Developed to help restaurateurs abide by California labor compliance, 7shifts has multiple features that could save your restaurant thousands.

With 7shifts, restaurant managers can easily share schedules two weeks in advance, preserve records of all employees, and alert employers when an employee is approaching his or her break.
Additionally, to help you save money, 7shifts alerts schedulers when their employees are approaching overtime eligibility to control spending and save money in even more ways. Learn more about 7shifts’s Restaurant Labor Compliance Software and California.

Recommended Reading: The 11 Employee Scheduling Best Practices + Tips for Restaurants

Optimizing the Punch-In/Out Process

The 7punches Time Clocking Software app is the best way to hold employees accountable for their breaks and their clock-ins. 7punches allows managers to set limits on early clock ins, enforce breaks, prevent unauthorized punches, and auto punch-out employees after a certain time. Even the most well-intentioned employees won’t be able to come back early from breaks or clock in early to show their dedication to the job – which means you’ll save money and have a better-running staff of employees.

Now that you know how to comply with these labor laws, you can use your new knowledge to empower your restaurant’s team and run your restaurant without getting fined.

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