Restaurants work to mitigate effects of paid time off mandatesRestaurants work to mitigate effects of paid time off mandates

Paid sick leave is hardly a new issue, but it remains a top concern for restaurant operators, as the list of jurisdictions mandating paid time off continues to grow and more lawmakers consider similar bills.

In 2014, New York City and its neighbor across the Hudson River, Jersey City, N.J., will join the lengthening list of U.S. cities offering paid sick leave. That list also includes San Francisco, which passed the country’s first paid sick leave law in 2006; Seattle; Washington, D.C., Milwaukee; Connecticut; and Portland, Ore. Legislation also is pending in Newark, N.J.; Massachusetts; Vermont; Tacoma, Wash.; Iowa; Michigan and Pennsylvania, forcing operators to figure out how to comply with a growing patchwork of rules.

For restaurant operators, mandatory paid leave raises the possibility of increased costs at a time when the economy remains challenging and regulations — such as those related to the Patient Protection and Affordable Care Act — are mounting. Any new mandates threaten already-thin margins and create a complex web of rules to follow, according to some operators.

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“At the end of the day, I just don’t think the bill belongs at the city level,” said Paul Seres, a partner of The DL, Dinner on Ludlow and Apartment 13 restaurants in New York. “I think that if anything, it belongs at the state level or the federal level. We are not opposed to the concept, but I think to put 100 percent of the onus on the employer is not fair.”

For now, Seres and others are learning to navigate each law’s regulatory waters, and many agree that logically preparing for the law and intelligently abiding by it once it is in effect is the best course of action.

Debating the details

Like other versions of the law already in effect, those in New York and New Jersey have varying provisions, but are predicated upon the basic belief that workers should be able to earn paid-sick time for a certain number of hours worked.

In New York, the law, which was captained by city councilwoman Gale Brewer, states that employees of businesses with 20 or more workers will get up to five paid sick days a year starting in April 2014. The mandate would later extend to businesses with 15 to 19 employees in October 2015, according to the legislation, which was passed in June. All other businesses would have to offer employees five unpaid sick days and exempt them from being fired for taking those days.

The latest version of the bill was an improvement to the original, said Seres, who is also the former president of the New York Nightlife Association, which folded into the New York Hospitality Alliance, of which he is currently vice president. “We were able to get real changes to the original bill,” he said.
 
Seres noted that the biggest changes were shifting the watchdog role from the department of health to the department of consumer affairs and the stipulation that employees can’t sue employers who allegedly violate the law.

The legislation in Jersey City, which goes into effect on Jan. 24, 2014, will require all businesses with 10 or more employees to allow workers to earn a maximum of five paid sick days per year. Business with nine employees or fewer must allow employees to accrue five unpaid days.

“Obviously, we are opposed to the legislation,” said New Jersey Restaurant Association president Marilou Halvorsen. She cited the fact that minors are not exempt as her No. 1 concern. “Now, you will have to give the 16-year-old busboy paid time off,” she said.

Seres noted, however, that legislation in Washington, D.C., has elements that make the law friendlier to operators than that in his home city. For example, Washington’s law has a carve-out for tipped employees, which excludes most wait staff, bussers and bartenders from receiving mandatory sick leave. Some D.C. city council members recently proposed to extend leave to tipped employees, but Seres said he supports a carve-out.

“Nine times out of 10, tipped employees are swapping shifts, so they are not really loosing a shift,” he said. “Tipped employees are communicative with one another. If they have to change shifts, they are going to change shifts.”

Building trust

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While some operators on the East Coast have been hesitant to embrace paid sick leave, the law is generally considered to be a success in San Francisco, where it has been in effect since 2007. A study conducted by the Institute for Women’s Policy Research in 2011 found that the law, after being effect for four years, had a low rate of abuse among employees and that two-thirds of employers supported the law.

“Usually, if there is an issue where people are abusing the law, there is a deeper-rooted problem between the business and employees,” said Aaron Noveshen, founder and president of The Culinary Edge, a restaurant and food business consulting company based in San Francisco.

Noveshen, who is also the co-founder of Pacific Catch restaurants, which operates four locations in the San Francisco Bay area, noted that while he is not generally in favor of mandating policies such as paid sick leave, he believes that compliance is important. Operators should to do their best to operate smoothly under the law and create an environment that is beneficial to both the business and its employees, he said.

“Take the high road, be transparent and talk to your staff,” he said. “Build trust and ask them not to abuse it. The youth and the staff of today are unbelievably loyal and appreciative, and won’t take advantage when they really feel that the management sets the right example.”

Makini Howell, chef-owner of three vegan restaurants in Seattle, where paid sick leave has been in effect since September 2012, has long supported employees getting paid time off when they are not well.

Howell, whose restaurants include Plum Bistro, Plum Café and Plum Market, told Nation’s Restaurant News earlier this year that while there is clearly a cost associated with offering paid sick leave, it is lower than the costs caused by a high rate of employee turnover.

“You have to want to keep people longer,” she said. “People have to look at it as a job they can depend on, not just that you depend on them. It’s a two-way street.”

Making it work

Seres said he believes that diligently monitoring his staff of about 75 employees across three restaurants once the law goes into effect in April 2014 would be key to creating a harmonious environment.

“We are looking at coming up with some kind of a matrix, where we are tracking when an employee takes time off,” he said. “We are going to have to dedicate more time, from an administrative standpoint, to keeping track of employees’ schedules.”

Aside from building trust and healthy relationships among management and staff, restaurants have to think of ways to recoup the cost of providing paid leave for workers, said Noveshen. The most obvious way to do this is to raise prices, which Noveshen said is most commonly done in one of two ways.

“You can either build it into the menu or you can put a surcharge on the meal,” he said. “What has manifested in San Francisco is that many restaurants have passed a surcharge of anywhere from 2 percent to 5 percent of the cost of the meal to cover the expense of the number of different mandates that exist when operating a business.”

The increasing number of mandates is also raising the stress levels of those running restaurants, the NJRA’s Halvorsen said. “With Obamacare, the new minimum wage and still coming out of a difficult economic environment, the industry as a whole just cannot afford to take on another regulatory burden,” she said.

Operators need to educate themselves and challenge such legislation in hopes of changing it to lessen the financial and operational blows to their businesses, she added.

Noveshen agreed, noting, “You can’t complain about it if you’re not doing anything about it.”

However, he added, “The best defense is a sales-driving, culture-building offense. The companies that take that approach and build the relationships with their teams, deal much less with the negative repercussions.”