Highlights of Federal and State Activity Impacting the Restaurant Industry

Federal Activity

Tip Credit:  The Department of Labor issued a proposed rule for tip provisions. The measure provides guidance including allowing restaurants that do not count tips as part of a wage, to pool tips and share with back of the house employees. It also ends the prior 80/20 rule that governed how and when tips can be counted as part of a server’s wages when doing side work. Counsel summary is here.

Depreciation: An oversight in the Tax Cuts and Jobs Act of 2017 requires qualified improvement property (QIP) and leasehold improvements to depreciate over 39-years instead of the intended 15-years, and also makes improvements on items like kitchen equipment or furnishings ineligible for bonus depreciation. Efforts on a QIP fix are underway. A summary is here.

*In March 2019, Senators Pat Toomey (R-PA) and Doug Jones (D-AL) introduced S. 803, the "Restoring Investments in Improvements Act. " The Tax Foundation issued a summary of the measure.

Menu Labeling: The Food and Drug Administration issued an August, 2019 fact sheet to educate stakeholders on consistent nutrition information for standard menu items and how to comply with menu labeling requirements. 

Joint Employer: The National Labor Relations Board’s (NLRB) 2015 Browning-Ferris Industries (BFI) decision created of a new “joint employer” liability standard, making any business that exercises indirect, potential, or even reserved control over the practices of another business and its employees a joint employer.  This standard could make franchisors responsible for actions of franchisees or companies responsible for actions of contractors. In September, 2018, the NLRB issued a notice of proposed rulemaking (NPRM). The proposed rule would return the standard to the direct and immediate control standard that was in place prior to the Board's Browning Ferris decision.  A summary is here.

State News

Plastic Straw Bans: California became the first state to enact a state-wide ban on single use plastic straws. The law, which went into effect Jan. 1 2019, applies only to full-service, dine-in restaurants, not fast-food establishments or other businesses. It sets a fine of $25 per day for restaurants that violate the rule, with the total not to exceed $300 annually.

Cashless Payments: Effective immediately, New Jersey has become the second state to prohibit businesses from refusing to accept cash as payment. A news report is here. Massachusets has a 1978 pro-cash measure on the books. Philadelphia, PA is the first city to ban cashless payments as the only transaction option in stores.  Starting July 1, 2019, restaurants in the city can not refuse to accept cash as payment. The law also prevents businesses from demanding surcharges on customers who pay with cash. Penalties include up to a $2,000 fine. A news report is here. Similar measures are under consideration in New York.