New FLSA Restaurant Guidance Clarifies Pay Rules Affecting Pizza Hut Workers

Department of Labor guidance for restaurants and fast-food establishments clarifies which employers and workers are covered by the Fair Labor Standards Act and spells out how tip-credit rules, food credits, and child labor limits can affect pay and work assignments at chains such as Pizza Hut.

The guidance defines the industry: "The restaurant/fast food industry includes establishments which are primarily engaged in selling and serving to purchasers prepared food and beverages for consumption on or off the premises." It also sets an enterprise coverage threshold: "Restaurants/fast food businesses with annual gross sales from one or more establishments that total at least $500,000 are subject to the FLSA." Individual workers who handle goods moving in interstate commerce may also be covered.

On wages and tips, the fact sheet notes that "Tips may be considered as part of wages, but the employer must pay not less than $2.13 an hour in direct wages and make sure that the amount of tips received is enough to meet the remainder of the minimum wage." The document further explains that "Tipped employees are those who customarily and regularly receive more than $30 a month in tips," and that "Food Credit: The employer may take credit for food which is provided at cost. This typically is an hourly deduction from an employee's pay. However, the employer cannot take credit for discounts given employees on food (menu) prices." Employers must provide advance notice to employees when they elect the tip credit and be able to demonstrate that workers receive at least the applicable minimum wage.

The guidance also lays out federal child labor protections. It states, "The FLSA child labor provisions are designed to protect the educational opportunities of youth and prohibit their employment in jobs and under conditions detrimental to their health or safety. Once a teen reaches age 18, federal child labor rules no longer apply." For younger workers, the guidance gives specific limits: for example, 14- to 15-year-olds may not perform certain food-service tasks and "may not perform jobs in the food service industry such as" cooking except at limited service points and baking.

The Wage and Hour Division has previously enforced these rules in a targeted initiative: "During FY 2000, investigators from the Employment Standards Administration's Wage and Hour Division conducted 309 investigations of full service restaurant, fast food and supermarket establishments to determine the level of compliance with the youth employment provisions of the Fair Labor Standards Act (the FLSA)." That survey found "Seventy percent (70%) of the fast food establishments in the baseline sample were in youth employment compliance."

Workers and managers at Pizza Hut should take these provisions seriously because tip-credit practices, food-credit deductions, and age-based work restrictions can change take-home pay and shift which tasks employees may legally perform. The Department of Labor materials carry a legal caveat: "This information is for general information and is not to be considered in the same light as official statements of position contained in the regulations." For questions, the Wage and Hour Division lists contact numbers: 505-248-6100 and toll-free 1-866-4USWAGE (1-866-487-9243), available 8 a.m. to 5 p.m. in your time zone.

The guidance highlights concrete rules that affect scheduling, pay calculations, and training assignments; employers should ensure their payroll practices and youth work assignments align with these standards, and employees who believe rules are being misapplied can raise the issue with Wage and Hour Division staff.