Food & Beverage Wage & Hour Audit Checklist

Hotel F&B concentrates the industry's most litigated practices in one division: tip credits that evaporate retroactively over a missed notice, tip pools poisoned by one shift lead with hiring authority, service charges coded as tips, and minors on the slicer. This checklist covers restaurants, bars, lounges, room service, and grab-and-go outlets. Check items off as you verify them — progress saves in this browser — and items flagged in bold apply only in the named jurisdictions. Print it for an outlet-by-outlet walkthrough; the page is print-optimized.

Tip credit administration#

• Signed, written tip-credit notices exist for every tipped classification, in the employee's language, reissued whenever the cash wage or pool structure changes.Why: 29 CFR 531.59(b) — no valid notice, no credit, for the entire period it was missing; New York requires the notice in writing.
• State/local: per-jurisdiction cash-wage pay codes are configured, with phase-out steps calendared — DC tipped cash to $10.30 on July 1, 2026; Chicago frozen at 76% ($12.96 from July 1, 2026; parity 2030/2033); Michigan at 40% ($5.49) in 2026, 50% permanent from 2031.Why: the stricter law always controls, and tipped-wage schedules now step on different dates in different cities.
• No-credit states: properties in California, Washington, Oregon, Nevada, Minnesota, Montana, and Alaska pay the full state minimum in cash with no tip credit configured anywhere in the pay system.Why: these seven states prohibit the credit entirely — a brand-standard $2.13 code reaching a California outlet is wage theft from day one.
• Payroll runs a weekly true-up confirming tips received equal or exceed the credit claimed each workweek, with shortfalls auto-paid in cash that period.Why: 29 CFR 531.59 — the credit is capped at tips actually received, measured workweek by workweek, not monthly or by pay period.
• Tipped overtime is built on the full minimum wage (1.5× MW minus the credit), never 1.5× the cash wage.Why: paying OT at 1.5× $2.13 is the most common tipped-overtime violation in hospitality audits — verify the math in the tipped overtime calculator.

Tip pools#

• A written tip-pool policy states contribution percentages, eligible classifications, and distribution timing, with signed acknowledgments from participants.Why: 29 CFR 531.54 — employees must be told of required contributions, and pooled tips must be redistributed by the regular payday.
• The eligibility roster is reviewed quarterly: no managers or supervisors receive anything from any pool — including shift leads, working sous chefs, or outlet leads who meet the executive duties test through hire/fire input or scheduling authority.Why: FLSA §3(m)(2)(B); DOL Opinion Letter FLSA2025-1 — even someone who only sporadically supervises is excluded if they satisfy the duties test.
• Back-of-house staff (cooks, dishwashers, stewards) are included only in pools where no tip credit is taken on anyone — every participant paid full minimum wage in cash.Why: the 2018 FLSA amendments permit nontraditional BOH pools only without a tip credit; mixing BOH into a tip-credit pool voids the credit for all participants.
• Managers keep only tips received directly from a guest for service they directly and solely provided (e.g., a manager personally working a private tasting).Why: 29 CFR 531.52(b) carves out sole-service tips; everything else a manager touches must go back to staff.
• Per-employee, per-period distribution records show amounts contributed and amounts received for every pool participant.Why: 29 CFR 516.28 requires tip records for tipped employees, and missing distribution records shift the evidentiary burden to the employer in litigation.
• Tip-outs to bussers, runners, and barbacks are verified as actually distributed — no house retention, and no walkout, breakage, or till-shortage offsets taken from pool funds.Why: FLSA §3(m)(2)(B) — an employer keeping any portion of tips owes the tips back plus the voided credit, and faces civil money penalties.

Service charges vs. tips#

• POS coding separates voluntary tips from mandatory charges — large-party auto-gratuities, room-service delivery charges, banquet-style event fees — at every outlet.Why: 29 CFR 531.55 — compulsory charges are wages, not tips: they can never fund a tip credit, and they flow through different payroll and tax rails.
• Menus, checks, and room-service cards disclose what each mandatory charge is and whether it goes to staff.Why: New York's Hospitality Wage Order (12 NYCRR 146-2.18/-2.19) presumes any charge for "service" is a gratuity owed to staff unless clearly disclaimed to the reasonable patron.
• Service-charge amounts distributed to employees are included in the regular rate for overtime in the week earned.Why: distributed service charges are remuneration under 29 CFR 531.55(b) — leaving them out of the regular rate underpays every overtime week.
• State/local: pass-through laws are honored where they apply — Massachusetts (c.149 §152A: service charges belong to wait staff), Hawaii (§481B-14: distribute or disclose), and city ordinances (Los Angeles, Santa Monica, West Hollywood, Long Beach) requiring full distribution to non-managerial workers who performed the service.Why: these laws convert a mislabeled "house" charge into a wage debt to the service team, with treble damages in Massachusetts.

Side work & dual jobs#

• A documented tipped-occupation analysis exists for borderline roles — baristas, food runners, counter and grab-and-go staff — keyed to direct guest interaction.Why: the federal 80/20/30 rule was vacated nationwide (Aug. 2024) and the pre-2021 occupation-based test restored (Dec. 2024); DOL Opinion Letter FLSA-2025-03 makes guest contact the dividing line.
• Full shifts of non-tipped work — deep cleaning, receiving, prep-only days — are paid at full minimum wage under a separate pay code, with no tip credit.Why: the dual-jobs doctrine survives the vacatur — a server detailed to a non-tipped occupation for the shift was never creditable, under any version of the rule.
• New York: outlets track non-tipped work daily — the tip credit is lost for the entire day when such work exceeds 20% of the shift or two hours, whichever is less.Why: 12 NYCRR Part 146 — New York's 80/20/two-hour rule survives the federal vacatur and is where the side-work risk now lives.
• Legacy 80/20 exposure for pre-vacatur periods has been assessed, and historical timekeeping and duty records are preserved through the limitations period.Why: plaintiffs still plead 80/20 theories from old sub-regulatory guidance in private litigation covering 2021–2024 workweeks.

Minors in F&B#

• No employee under 18 operates, cleans, or assembles power-driven meat slicers or commercial dough mixers — enforced by posting and by training the chefs who hand out tasks.Why: FLSA Hazardous Orders 10 and 11 bar minors from power-driven meat-processing and bakery machines, and cleaning the slicer counts as operating it.
• The scheduling system hard-blocks 14- and 15-year-olds beyond 3 hours on a school day / 18 in a school week, 8 hours / 40 in non-school weeks, and outside 7 a.m.–7 p.m. (9 p.m. June 1 through Labor Day).Why: 29 CFR 570.35 — child-labor hour violations are assessed per minor, per violation, and scheduling software is the only reliable control.
• 14- and 15-year-olds are limited to permitted occupations — no baking, and only the narrow cooking duties the regulations allow.Why: 29 CFR 570.34 confines this age band to listed tasks; kitchens are dense with prohibited equipment and duties.
• State: minimum ages for serving, pouring, and bussing alcohol are verified per state for every outlet role a minor might fill.Why: state alcoholic-beverage laws set service ages (commonly 18, sometimes higher) that override scheduling convenience and federal rules.

Payroll & tax#

• Employee tip declarations are collected at least monthly (by the 10th of the following month), ideally POS-prompted at clock-out every shift.Why: IRC §6053(a) — and systematically under-declared cash tips surface later as employer-side FICA assessments under §3121(q).
• Form 8027 is filed per large food or beverage establishment — outlet by outlet, not consolidated — with allocated-tips computations when declared tips fall below 8% of gross receipts.Why: each outlet where tipping is customary and more than 10 employees typically work is its own establishment for 8027 purposes.
• Payroll is configured for 2026 W-2s: qualified voluntary tips in Box 12 code TP, FLSA overtime premium in Box 12 code TT, and the three-digit Treasury occupation code in Box 14b for every tipped role.Why: OBBBA reporting is mandatory for 2026 wages — the IRS Notice 2025-62 penalty relief covered 2025 only.
• Qualified-tip coding excludes mandatory service charges and auto-gratuities — only voluntary tips feed Box 12 TP.Why: the final regulations (TD 10044, Apr. 2026) limit the employee deduction to voluntary tips; mis-coding service charges overstates employees' deductions on a form the hotel signs.
• The §45B FICA tip credit is computed on Form 8846 for food and beverage tips, excluding tips used to satisfy the frozen $5.15 minimum-wage base.Why: the employer-side FICA credit on reported tips is routinely left unclaimed — found money that also incentivizes accurate tip reporting; see tip tax & payroll.

Scope notes#

Unflagged items state the federal baseline; bold-flagged items apply only in the named states and cities, and tipped-wage schedules change every January and July — confirm current rates on each property's state page before closing findings. For the underlying law, see tip credit, tip pooling, service charges, and minors. Educational tool, not legal advice — see the disclaimer.