CRA Insights - Common Labor Law Questions

November 2, 2015

Wage and hour lawsuits continue to be the biggest source of liability for employers under the Fair Labor Standards Act (FSLA) according to the Federal Judicial Center. Our members consistently express to us the challenges they face with labor law and striving to stay compliant.

To assist our members, the CRA has started a series highlighting common labor law concerns and how to avoid violations. If you have questions on regulations, laws, or rules affecting your business, don’t hesitate to call the CRA. We can either help answer your questions or guide you to appropriate legal assistance.


We all know that employers are allowed to pay tipped employees a lower hourly wage than those employees who don’t make tips, provided the tipped employee makes $30 or more a month in tips. But there are certain requirements an employer must fulfill. The employer must provide advance written notice to the employee before they can take a tip credit on the employee. The notice must include the amount of tip credit the employer will claim on the employee. If the employee’s tips don’t make up the difference between what they are being paid per hour and the Colorado minimum wage, calculated over a period of one week, the employer must pay the difference to ensure the employee received at least minimum wage for hours worked. Also, during an employee’s shift no more than 20% of their work activities can be maintenance or work that is not directly related to serving customers. If they exceed 20%, than they must be paid the full minimum wage for those hours worked. (2016 minimum wage will be $8.31 non-tipped, and $5.29 tipped)


Employers may run a tip pool but they must comply with certain requirements. The employer must provide written notice to all employees who will be participating in the tip pool prior to their participation. Only employees who customarily and regularly receive tips can participate in the tip pool. According to federal law, servers, counter personnel, bussers, and service bartenders can clearly participate. Those that can’t participate are owners, managers, supervisors, janitors, dishwashers, chefs, cooks, and food prep personnel. If you are thinking about organizing a tip pool, please contact an attorney to ensure you are administering it correctly.


This issue is getting a lot of media attention recently due to coverage of a couple restaurants moving away from the tipped model. Under both Colorado and Federal law any charge that is automatically applied to the bill and the customer must pay, even automatic gratuities for large parties, is considered a service charge. There are very distinct differences between tips and service charges, here are just a few.


  • Are given freely from the customer to the employee
  • Belong to the employee, not the restaurant
  • Management cannot direct the use of that money
  • Sales tax is not applied to a tip

Service Charge:

  • Is anything automatically applied to the bill
  • Is considered revenue of the business
  • Management can determine how the money will be used
  • Funds can be given to the employee, but must be done through the payroll system
  • Any money given to the employee from the service charge cannot be counted towards a tip credit
  • Restaurants must collect appropriate sales tax


Simply giving an employee the title of manager and paying them a salary does not automatically make them exempt from overtime rates. There are two tests employees must meet first before they can be considered exempt:

1)      Must meet the salary requirements of $455 a week or $23,660 a year; and

2)      Must meet one of the duties tests. (There are several but the one most often relating to our industry follows.)

Executive/Managerial: Many restaurant employees are exempt from federal wage and overtime rules because their duties qualify them for the “executive” or “managerial” exemption. To meet this exemption, the employee’s primary duty must include:

i)        Managing the business or a recognized division, subdivision or department

ii)       Customarily and regularly supervising and directing the work of two or more full-time employees or their equivalent, and

iii)     Having authority to hire or fire other employees, or having their recommendations as to hiring, firing, job advancement, promotion or any other change of status of employees be given particular weight.


Under the Fair Labor Standards Act, employees are entitled to certain breaks during their shifts.

Meal Period – After consecutive hours of work employees are entitled to a 30 minute, uninterrupted, and unpaid meal period. If an employee is asked to do any work during that 30 minutes they must be paid for the whole 30 minutes. If work conditions don’t allow for the employee to take a meal period then the employer must allow the employee to eat a meal of their choice while they work. However, this does not require the employer to provide the meal. Rest Period - Employees are entitled to a 10 minute paid rest period in the middle of each 4 hours of work when practicable.


All employers in the State of Colorado are required to complete the Colorado Affirmation requirements when hiring new employees. Employers must comply with the requirements of the affirmation within 20 days of hiring an employee and must retain copies of work eligibility documents used on the Federal I-9 form. If an employer has not completed these requirements on current employees DO NOT try and complete them after 20 days past hiring. Simply start complying with this requirement on employees hired after learning about the affirmation requirements.


  • Complete a valid form once the 20 day calendar days have elapsed
  • Backdate or otherwise enter incorrect information onto the form for the affected employees. The employer must not enter false of fraudulent information onto the form.
  • Attempt to make and retain copies of employee identity and employment authorization documentation if you did not comply with the requirement within 20 calendar days of hiring the employee. Seeking such documentation after the 20 day window has elapsed does not comply with Colorado law, and may also violate separate federal immigration laws.

It is recommended that these forms and the copies of documents used to comply with the affirmation are kept in a separate file than the federal employment verification forms and the personnel file.


DO NOT ALLOW OFF THE CLOCK WORK! All nonexempt employees must be paid for all hours worked. This includes job relevant training and meetings that employees are required to attend.

This information was gathered through various resources including Fisher & Phillips, Enquiron, and the National Restaurant Association legal problem solver. If you would like legal advice on any of the issues discussed, please contact the CRA and we will assist you in finding the appropriate legal counsel.

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