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On-Call Controversy

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Establishing on-call schedules has been a safety net for frenzied restaurant environments, but new regulations from state and local governments are forcing restaurants to operate differently.

By Kevin Hardy October 2015 Employee Management

The restaurant industry is reliably unpredictable. What was supposed to be a bustling Friday night can quickly turn into a shockingly quiet, slow stretch. Likewise, there’s no telling when tables could surprisingly fill up during a thin-staffed weekday shift.

So it’s no wonder then that restaurants, like many other industries, have long relied on on-call workers to adjust staffing levels to meet fluctuating demand.

But the practice of putting workers “on-call” in the restaurant industry is gaining attention from regulators. Some state and local governments have cracked down on employers who use on-call scheduling—forcing employers to pay workers for certain portions of shifts—even shifts they don’t work.

New regulations are also targeting the practice of cutting workers early from scheduled shifts, which could also cause financial and logistical strains for operators.

New York Attorney General Eric Schneiderman sent letters to multiple retail chains in April warning them that on-call shifts—in which employees check in shortly before a shift to see if they’re needed—could violate the law because the noncommittal shifts leave workers with too little time to make family arrangements and prevent them from earning income elsewhere.

In California, both Oakland and San Francisco have passed ordinances targeting on-call wages. And a pending bill in Congress could eventually hit retailers and restaurants nationally.

“I think there’s a tremendous pressure by regulators,” says Jim Evans, a Los Angeles–based partner in law firm Alston & Bird’s labor and employment practice group. “Not in all of the states right now, but in specific geographic areas.”

Regulators seem to be targeting big retail and restaurant chains first, Evans says. But those regulations are likely to trickle down to most operators.

“Lots of industries are taking advantage of the flexibility of having on-call workers. But retail and restaurants are the most frequent users of on-call shifts, because they’re trying to control payroll expenses in light of unpredictable demand,” Evans says.

But labor representatives see the other side of the equation. Being on-call puts major restrictions on personal time, yet wages aren’t always guaranteed.

“If you think about it, the on-call worker has to put his personal plans on hold,” Evans says. “They can’t be somewhere else. They can’t take a second job unless they want to forgo that on-call shift. It creates a lot of restrictions for the on-call employee, and in turn less predictability in earnings.”

The new regulations generally stress schedule, and thus, income predictability. Some ordinances have required employers to post schedules at least two weeks in advance. And when on-call workers end up staying home, new rules require the employer to pay a minimum rate—in some cases as much as half of what the employee would have earned by working the entire shift.

While employers may start shying away from scheduling on-call shifts, Evans says there’s still nothing to stop them from soliciting volunteers when they’re short-handed.

He also says, “There’s nothing wrong with calling an employee and saying, ‘I know you’re off today, but would you like to come in and earn some extra money?’”

Patrice Rice, founder and CEO of restaurant recruiting firm Patrice & Associates, says many restaurants are well-prepared for these new regulations.

With increasing minimum wages and new healthcare mandates, she says many operators have cut back their level of staffing, transitioning many employees from part-time to full-time status. And she says the entire industry is simply being better to its employees.

“When I first started this 25 years ago, it was churn and burn at all levels. That really has changed,” Rice says. “Good talent is so hard to identify and keep that restaurants have really become more employee-oriented.”

Rice says most restaurant managers are adept at building tight schedules that keep just enough people on hand without having to use on-call shifts. Because of increased pressure to retain staff, she says, many full-service restaurants are also abstaining from cutting employees’ shifts early during slow periods.

“I don’t think a restaurant is going to upset a good hourly employee for four hours of pay,” she says. “Even at $10 an hour, I don’t think they will. Because if they lose them, they’ll lose a lot more than that four hours of pay. It’s much harder to replace them.”

The restaurant business has adapted to increased minimum wage pressures and other industry-specific regulations like an IRS crackdown on tips for employees. She says the industry is resilient and can adjust to this change, too. After all, she points out how people falsely fretted that rising wages would lead to $10 hamburgers at fast-food drive-thrus.

Robert Maynard, CEO and co-founder of North Carolina–based Famous Toastery, adopts a similar viewpoint. He says his six-unit breakfast and brunch concept is already committed to treating employees well. It’s a lifestyle brand and he wants his workers to earn a livable wage and leave a shift with little stress.

“We think it’s wrong to just call somebody up at 3:30 or 4:30 in the morning,” he says. “That’s not a job. That’s enslavement.”

But he says posting schedules two weeks in advance seems excessive given the unpredictability of factors like big catering events. But he says the company can adapt.

“The truth is if this type of thing comes up in a state where we’re operating, we’re not going to go crying and playing the victim,” he says. “What happens is you have to be a little tighter.”

For instance, instead of sending workers home early during slow times (and paying them anyway), he says the company could shift responsibilities, asking servers to work stocking the kitchen or cleaning the dining room, putting the restaurant “in a position to be more productive, to be more efficient.”

“We’re trying to stay ahead of it, and we don’t take it personally,” he says. “If it changes for us, it changes for everyone. It’s a level playing field.”

But he says government rules tend to see only one side of the equation, unfairly painting the industry with a broad brush.

“We’re not Red Lobster. We’re not Olive Garden,” Maynard says. “They get in trouble for this because they have to meet investor expectations every three months.”

James Versocki, counsel for the New York State Restaurant Association, says most litigation he handles is based on wage-and-hour issues. While New York’s recent move was aimed at the retail industry, he says the same rules likely apply to restaurateurs.

Defining what time should and shouldn’t be compensated is up for debate. Versocki says a good rule of thumb is to consider whether the employer is exerting so much control over an employee’s time that he can’t effectively do much else. In that case, the employer is likely liable to pay wages.

“Think of a delivery person. If you have a delivery person sitting there waiting for a delivery—even if they don’t get a delivery, they have to stay close to restaurant. They’re not effectively able to go out and do whatever they want. It’s not their personal time,” he says. “The critical thing is when employees lose the right to do what they want with that time, that means the employer is exerting an amount of control.”

This isn’t the only regulation to target wage and labor issues recently. Aside from minimum wage mandates and IRS crackdowns, many restaurants were affected by President Obama’s executive order in June that forced employers to pay overtime rates to certain lower-paid, salaried managers.

I think there’s been an incredible focus on the hospitality industry over the last few years. There’s been a huge focus by regulators,” Versocki says. “At some point, people have to step back and look at the overall impact on this industry, which by the way employs 10 percent of the nation’s workforce.”