The restaurant industry is one of the most vulnerable to labor law violations since tipped employees are exempt from the benefits typically guaranteed by the Fair Labor Standards Act (FLSA). Employers of restaurant workers are not required to pay employees minimum wage ($7.25, or the current rate) if they are paid primarily with tips and the employer compensates them at least $2.13 an hour.

However, common problems arise when earnings from tips fall below the minimum wage rate. In that case, employers must make up the difference in earnings. Another frequent violation involves restaurants that do not provide workers with any cash wage, and instead force them to rely solely on tips.

"The restaurant industry employs some of our country’s lowest-paid workers, who are particularly vulnerable to exploitation," said Jeffrey Genkos, director of the Wage and Hour Division in Portland, Oregon. "For a variety of reasons, including the fear of retaliation and of losing their jobs, these employees are reluctant to step forward and complain when subjected to wage violations."

Another thing restaurant employers should consider when processing payroll is overtime pay calculations. According to the Department of Labor, overtime pay rates for tipped employees must combine all compensation, including hourly wages, tips earned and other commissions or bonuses. Restaurant owners and managers can avoid FLSA violations by using advanced payroll processing services that are capable of calculating complicated rates. 

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