App-based Delivery Services: Grubhub Inc. Subject to NYC Council

Will New Laws Emerge for Delivery Services Practices? Today many people use app-based delivery services for ordering food. After all, the convenience of apps on cell phones and other devices makes ordering easier. However, restaurant owners have growing concerns. According to a recent Bloomberg article, New York City Council members warned Grubhub Inc., a popular app-based delivery system, that they might soon be subject to regulations. Profit Issues for Restaurants with App-based Delivery Services Companies with app-based delivery services are charging as high as 33% per order. This creates a problem because many New York restaurants have profit margins of 10% or less. Councilman Mark Gjonaj believes that online ordering may be a contributing reason for the fact that 80% of the city’s restaurants fail within five years. Online Delivery Service Is Growing Yet, app-based orders are growing. By 2020, they may comprise 40% of restaurant sales. In fact, over the next 10 years, predictions are that online food ordering will reach $365 billion. Restaurant owners complain that Grubhub sometimes has charged commissions when no food was even ordered. It has also created its own phone numbers so calls go directly to Grubhub. In an effort to appease the pressure from the NYC Council, the company provided restaurants with 120 days to appeal such erroneous orders. Council members said the company should put no time limit on refunds and should hire independent auditors to evaluate the orders in dispute. Control Over the Restaurant’s Market The Grubhub CEO says that the company puts money into marketing a restaurant’s menu and has a large database that lists customer’s phones, emails, credit...

The Restaurant Industry and DOL Battle Over Tipped Wage Policy

Why Did the RLC Sue the DOL over Tipped Wages? On July 6, the Restaurant Law Center (RLC) sued the Department of Labor (DOL) over an enforcement policy that demanded tipped workers must receive full minimum wage under certain circumstances for non-tipped work. Workers spending 20 percent or more of their weekly hours doing tasks that were not tipped work had to receive full minimum wage for those hours. The RLC is the litigation department of the National Restaurant Association. It presented its case before a federal court in Texas, requesting that the court invalidate the policy. It claimed that under the Administrative Procedure Act, the policy was arbitrary and capricious. Tipped Wage Policy Details Tipped employees, such as bartenders and servers receive a minimum base of at least $2.13 per hour as long as their hourly pay plus tips is more than the full minimum wage of $7.25 per hour. If the employee’s tips plus $2.13 base do not total $7.25 per hour, the employer must make up the difference. Examples of side tasks that are not tipped functions include filling salt and pepper shakers, rolling silverware in napkins, stocking liquor, washing glasses and so on. Allegations Brought by the RLC According to a BNA article, the RLC alleges that the Obama Administration slipped a policy into the internal agency handbook without public notice or opportunity for dispute. Doing so was in violation of the Administrative Procedure Act (APA). The lawsuit requests the Court to set aside the provision and enjoin enforcement of the APA. The RLC argues that the policy is contrary to the Fair Labor Standards...

Restaurant Industry: FAQs about Tips

Owners in the restaurant industry often have questions about tips. As a restaurant owner, it’s important to know your rights and responsibilities regarding tips so you can avoid disputes with employees and not put your business at risk. The Fair Labor Standards Act (FSLA), which is federal law, and the New York Labor Law (state law) determine how restaurant owners must deal with tips. In the past, people paid restaurant bills with cash, but today credit cards are a popular and common form of payment. How must a restaurant owner deal with credit card tips? When tips are received by credit card, the owner must pay the employee the tip amount due no later than the regularly scheduled payday. Credit card companies charge a fee to the merchant for use of credit cards, and the fee is a percentage of the total amount paid on the card. The employer deducts the pro-rated share of the credit card company charge from the tip when calculating the employee’s tip. How must an employee’s wage statement reflect wages and tips? The wage statement must indicate the amount being paid to the employee in wages and the amount paid in tips. How should employers handle cash tips? Employers can allow employees to leave their cash tips with the employer during a particular pay period. However, doing so must be voluntary and up to the employee. Employers can hold tips as a service to the employee, and employers would indicate the amount in tips and wages in the wage statement. Employers cannot make their service of keeping cash tips as a mandatory hiring condition...