The Illinois Restaurant Association receives a wide-variety of questions ranging from labor regulations to liquor codes. The following are some of the most frequently asked questions and associated answers.
Please Note: This information is provided as a membership service for restaurant operators, and is not intended as legal or professional advice or counsel. Any local, state or federal rules, regulations or laws summarized are subject to change. The Illinois Restaurant Association strongly encourages readers to consult with their attorney or competent professional, prior to taking action based on the following information.
Q: Do I have to pay my employees for training sessions and staff meetings?
A: Employees must be paid for all hours on duty, including training sessions and staff meetings, if the employer requires attendance.
Q: Can I charge my servers or cashiers for cash shortages or walkouts?
A: Employers are prohibited from charging an employee for shortages or walkouts. However, in some cases an employee is permitted to voluntarily reimburse you for these losses. Make sure that you get a signed written statement that the reimbursement is in fact voluntary.
Q: Can I charge my employees for damaged property or breakage?
A: Employees cannot be charged for damaged property or breakage. As with shortages, voluntary reimbursements may be permitted.
Q: Do I need to pay for time taken off for breaks?
A: If breaks are less than 30 minutes in duration, employees must be paid for this time. If however, the employee is given a break of 30 minutes or more and the employee is relieved of all work duties, no payment of wage is required for that time.
Q: When do I need to give a break?
A: An employer must permit at least a 20-minute meal break for employees scheduled to work 7.5 continuous hours. This meal period must begin no later than 5 hours after the start of work.
Q: Can I deduct the cost of employee meals from the wages that I pay?
A: The reasonable cost of meals furnished by the employer and actually used by the employee may be considered as part of the wage paid an employee. To qualify, the employee must receive the meal for which he/she is being charged. Additionally, the acceptance of meals must be voluntary and not coerced. The reasonable cost of meals furnished by the employer excludes profit and includes only the actual cost of the food, its preparation and related supplies.
Tips & Wages
Q: Where can I find information on the City of Chicago Minimum Wage Increase that took effect July 1, 2015?
A: The City of Chicago's minimum wage ordinance passed in December 2014 raises the hourly minimum wage for employees in the City of Chicago to $10 in 2015, $10.50 in 2016, $11 in 2017, $12 in 2018, and $13 in 2019, indexed annually to the Consumer Price Index (CPI) after 2019, with a cap of 2.5% each year. The ordinance also increases the minimum wage for tipped employees in the City of Chicago from the current state minimum of $4.95 to $5.45 in 2015 and $5.95 in 2016, then indexed annually to CPI after 2016, with a cap of 2.5% each year.
Visit the City of Chicago's Business Affairs and Consumer Protection Minimum Wage webpage that explains the minimum wage ordinance, implementation schedule, and other requirements.
Q: Is it true that my tipped employees only need to report 8% of their sales as tip income?
A: Contrary to a commonly held belief, employees are not required to report just 8% of their sales as tipped income. The law has always required that all tip earnings be reported as income. The 8% figure is only relevant to the employer as a threshold that must be reached in order to avoid the I.R.S.’s "tip allocation" requirement.
Q: What are the rules for taking a "tip credit" on tipped employees’ earnings?
A: If an employee regularly receives tips, the employer can account for this income when calculating the minimum wage rate. Taking credit for tipped earnings can reduce the employer’s payroll contributions while ensuring that their employees earn the adult minimum wage of $8.25 per hour. In Illinois, the amount of the tip credit taken cannot exceed 40% or $3.30 per hour; therefore, the tipped wage rate would equal $4.95 per hour, in addition to any tips he or she receives.
Q: How do I calculate the "tip credit"?
A: Tips plus wages paid must equal or exceed the minimum wage. The tip credit amount cannot exceed 40% of the Illinois minimum wage. Therefore, the tip credit amount cannot exceed $3.30. Thus an employer must pay tipped employees at least $4.95 per hour. Tip credit $3.30 + tipped wage rate of $4.95 = minimum wage of $8.25.
Q: Can the "tip credit" be taken on overtime pay?
A: Assuming a maximum tip credit of $3.30 per hour, the overtime pay rate would be calculated as follows. $8.25 minimum wage x time and a half (1.5) minus tip credit of $3.30 = $9.08
Q: Can I deduct the credit card processing fee from my tip payouts?
A: If the employer pays the credit card company a processing service fee, the employer may deduct this amount from the tip payout. For example, if the credit card company charges 2% on charged sales as a service fee, the employer need only pay the server 98% of the charged tip.
Q: What are the rules regarding when to distribute credit card tips?
A: If tips are charged on a credit card, the employer must distribute these tips to the employee no later than the next regular payday. The employer may not delay distributing tips until reimbursement by the credit card company, even if receipt of the funds by the employer are delayed by the credit card company.
Q: Am I allowed to put an automatic gratuity on large parties?
A: Restaurants that charge an automatic percent service charge for large parties (ie 18%) will no longer be able to treat these amounts as tips, according to an IRS ruling. The IRS clarified that service charges paid on or after Jan. 1, 2014, will be considered part of employee wages and subject to withholding and reporting requirements.
Q: When is a tip a tip?
A: The ruling provides that a tip satisfies the following four factors: The payment must be made free from compulsion. The customer must have the unrestricted right to determine the amount.The payment should not be the subject of negotiation or dictated by the employer policy.Generally, the customer has the right to determine who receives the payment.
Q: When is a tip really a service charge?
A: The ruling provides the following illustration of an alleged tip that is actually a service charge: A restaurant's policy of adding an 18 percent service charge to the bill for parties of six or more is a service charge rather than a tip because the customer did not have the unrestricted right to determine the amount of the payment - it was dictated by the restaurant's policy - and the customer did not make the payment free from compulsion.
Q: Can I put a suggested tip amount on the receipt?
A: A bill with sample calculations of different tip amounts, where the actual tip line and total amount line is left blank, is truly a tip.
Affordable Care Act (ACA)
Q: Where can I get updates on The Affordable Care Act?
A: Click here.
Q: What size employers do not have to offer health care?
A: The ACA’s employer mandate eventually will require employers of 50 or more full-time-equivalent employees to either offer health benefits to their full-time employees or face possible penalties. In a final rule issued February 2014 to explain how the mandate will work, the Obama Administration said that employers with 50 to 99 full-time-equivalent (FTE) employees won't be subject to the law’s employer-mandate penalties until 2016.
Q: What other rule changes were made in February 2014?
A: Other provisions of the final rule include:
- Make permanent the "look-back measurement method:" The final rule gives covered employers the option of using a look-back period to measure the full- or part-time status of variable-hour and seasonal employees. This measurement method can give employers more stability and predictability in knowing which employees are eligible for health care coverage under the law. The Treasury Department also clarified that seasonal employees in positions working six months or less in a year generally aren’t considered full-time employees.
- Offer transition relief for certain employer penalties: Penalty "A" will apply under the law to covered employers who fail to offer minimum essential coverage to "substantially all” of their full-time employees. For 2015, the Treasury Department says "substantially all" means employers must offer coverage to at least 70 percent of full-time employees. Starting in 2016, covered employers must offer coverage to 95 percent of their full-time employees to avoid Penalty A.
- Offer transition relief for employers with non-calendar-year health plans: For covered employers who offer non-calendar-year plans, the final rule clarifies that the employer mandate will take effect on the first day of their plan year in 2015, rather than Jan. 1, 2015.
Q: Are there penalties for employers subject to the law who don’t offer coverage?
A: Yes. "Applicable large employers" subject to the employer mandate can choose not to offer coverage to their full-time employees. However, if at least one employee uses a premium tax credit to access coverage on an exchange, the employer would be subject to a penalty of $2,000 per full-time employee annually (or $167 monthly).
Q: Are employees’ tip earnings included when determining whether employees can afford employer-sponsored health coverage?
A: Yes. Tip income is considered part of an employee’s wages and household income.
Q: Are there penalties for employers who offer required coverage but it isn’t affordable to their employees?
A: Yes. If an employer offers coverage to their full-time employees, but the employee's contribution is more than 9.5 percent of their household income, and that employee accesses coverage using a premium tax credit on the exchange, the employer is subject to a $3,000 annual penalty per full-time employee doing so (or $250 monthly).
Q: Do I have to offer coverage for my part-time employees?
A: No. Part-time employees (those who average fewer than 30 hours per week) are counted only in determining whether an employer meets the 50 full-time-equivalent threshold for coverage under the law.
Q: Does the coverage I offer dependents of my full-time employees need to be "affordable”?
A: While the law requires large employers to offer health care coverage to full-time employees and their dependents to avoid penalties, the law doesn’t require dependent coverage to meet an affordability test. The affordability of an employer’s lowest-cost plan is based on what the full-time employee pays for self-only coverage — not what he or she pays for dependent coverage.
Q: How will I know my employee’s household income to determine whether my plan is "affordable" for each full-time employee?
A: You probably won't know their household income, nor would you want to. The Treasury Department/IRS suggested an alternative approach that would allow employers to base the "affordability" calculation on an employee's W-2 wages (Box 1) instead of their household income.
Q: I heard there are small business tax credits available. When do they begin, and am I eligible?
A: Certain small businesses with up to 25 full-time-equivalent employees are eligible for a tax credit for contributing to their employees' health coverage.
Q: If I have three restaurant companies, are they each considered separate employers under the health care law?
A: Not necessarily. For the purposes of health care reform, a single employer is defined by the "common control” clause in the tax code [IRC Sections 414 (b), (c), (m), (o)]. Consult your tax adviser to see how the provision applies to you. If you are considered a single employer, all the employees must be combined together for purposes of calculating whether an employer is above or below the full-time-equivalent threshold.
Q: If a full-time employee declines the health care coverage I offer, will I owe a penalty?
A: No. As long as you can show you offered that full-time employee the option of enrolling in an affordable, minimum-value health plan.
Teenage Workers in the Industry
Q: How old must teens be to be employed in a restaurant?
A: Children under the age of 14 may not be employed in restaurants. If the establishment serves liquor, individuals under the age of 16 may not be employed. No one under the age of 18 may be allowed to operate or clean power-driven food slicers or meat processing machines. No one under the age of 16 may do hot cooking, baking, repairs or maintenance on machines or equipment.
Q: What are the work hour restrictions on teen workers?
A: Illinois Child Labor laws do not cover persons 16 and older. Persons 14 and 15 years old have restricted hours of work under the child labor laws which states that minors:
- May work only between 7a.m. and 7p.m. (Except between June 1 and Labor Day when working hours may be extended to 9p.m.)
- May not be employed more than 8 hours per day, or 3 hours per day on days when school is in session.
- May not be employed more than 48 hours per week during non-school weeks or more than 24 hours per week when school is in session.
Q: Can I serve alcohol to a minor if their parent is present? What if it is in conjunction with a religious ceremony?
A: It is illegal to sell, give, or deliver alcoholic beverages to anyone who is under the age of 21. It is also illegal for anyone under the age of 21 to buy, consume, or possess alcoholic beverages. Retail licenses cannot serve alcohol to minors in the presence of their parents. In the case of a religious ceremony or service, it is acceptable for minors to consume alcohol during the service or ceremony.
Q: Can I give or buy a customer a drink "on the house"?
A: Yes, as long as such practice is not advertised and is not intended to improve public relations or promote consumption of alcoholic liquor.
Q: How old do my employees have to be to sell and serve alcoholic beverages?
A: All persons serving, selling or delivering alcoholic drinks must be 18 years or older, unless increased to age 19, 20, or 21 by local ordinance. Check with the local liquor commissioner (generally the Mayor), or local ordinances.
Q: Can I purchase liquor at a retail store to sell at my business?
A: Retail liquor licensees must purchase all alcoholic liquor from a licensed distributor authorized to sell that product within the retail licensee’s geographic area. Retail liquor licensees are not allowed to purchase alcoholic liquor for resale from another licensed retailer.
Q: Can I offer "happy hour” or drink promotions to my customers?
A: Yes. On July 15, 2015, Governor Rauner signed SB 398 - the Culinary and Hospitality Modernization Act - into law. This law permits licensees to offer discounted drinks for up to 4 hours per day, and not more than 15 hours per week.
Notice of the discount of alcohol drinks must be made publicly available 7 days prior to the specified time on the licensee’s premises or on their website, and drinks may not be discounted between the hours of 10:00 p.m. and the licensed premise's closing hour, among other restrictions. Visit the Illinois Liquor Control Commission's website for more information on happy hour regulations in Illinois.
Q: Is Dram Shop insurance necessary?
A: Yes. In fact, it became mandatory as of January 1, 2004. The law provides that persons that apply for both local and state retailer "on-premise” liquor licenses must provide proof of Dram Shop insurance for the maximum liability limits as a requirement for both licenses to be issued.
Q: Is there a restaurant trade show in Illinois?
A: The Illinois Restaurant Association partners with the National Restaurant Association to promote the National Restaurant Association Restaurant Hotel-Motel Show held at Chicago’s McCormick Place usually the third weekend of May. Foodservice members of the IRA/NRA receive one complimentary badge.
IRA Sanitation and Alcohol Awareness Classes
Q: How long does it take the Illinois Restaurant Association to process a sanitation or alcohol awareness certificate from when the test is taken to approval?
A: Approximately 10-14 weeks.
Q: What does a sanitation course consist of?
A: The state of Illinois requires that all foodservice establishments must be under the operational supervision of a certified person at all times. In this 3-day Foodservice Sanitation Certification class, the content will cover:
- Prevention of Foodborne Illnesses
- Codes and Regulations
- Pest Control
- Cleaning and Sanitizing
- Employee Training
- Facilities and Equipment
- Personal Hygiene
Q: How long is the sanitation certificate valid for?
A: The certificate is good for 5 years and must be renewed by taking the 5-hour recertification class prior to the certificate’s expiration date.
Q: How long is the Beverage Alcohol Sellers & Servers Education Training (B.A.S.S.E.T) certification for responsible alcohol service valid for?
A: Liquor laws are very specific to municipalities. It’s best to check with local liquor commissions however, in the city of Chicago, the certification is valid for 3 years.
Restaurant Tax Center
Q: Where can I access restaurant tax information, forms, and resources?
A: IRS Restaurant Tax Center or Small Business Self-Employed Tax Center
Q: How can I access the Video Gaming Act and adopted video gaming rules?
A: To access the Act via the Internet, go to www.igb.illinois.gov.
Q: Can local jurisdictions prohibit the use of Video Gaming Terminals (VGTs)?
A: Yes. A municipality may pass an ordinance prohibiting video gaming within the corporate limits of the municipality. A county board may pass an ordinance prohibiting video gaming within the unincorporated areas of the county.
A list of all Illinois municipalities and an indication of whether or not video gaming is allowed in each municipality is posted on the IGB website and is updated on a daily basis. If you have any questions about the status of your community, please contact your local municipal authority.
Q: Are VGTs allowed anywhere inside a Licensed Video Gaming Location?
A: VGTs must be located in an area restricted to persons 21 years of age and over, the entrance to which is within the view of at least one employee who is over 21 years of age. For all Locations that restrict admittance to patrons 21 years of age or older, a separate restricted area is not required. For all Locations that admit individuals under the age of 21, a physical barrier to the gaming area, including but not limited to a short partition, gate or rope is required. No barrier shall visually obscure the entrance to the gaming area from an employee of the Location who is over the age of 21.
Q: Are there limits on the hours of operation of a VGT?
A: Yes, hours of operation of a VGT must coincide with the legal hours of operation for the consumption of alcoholic beverages on the premises.
Q: How will the distance restrictions in Section 25(h) of the Act be measured?
A: Video gaming is restricted from the following locations:
1) 1,000 feet of a facility operated by an organization licensee under the Illinois Horse Racing Act of 1975 (the Board may waive this restriction in certain circumstances);
2) 1,000 feet of the home dock of a riverboat licensed under the Riverboat Gambling Act (the Board may waive this restriction in certain circumstances); or
3) 100 feet of either a school or a place of worship under the Religious Corporation Act (the Board cannot waive this restriction in any circumstance).
Q: Are licensees allowed to use player tracking systems or establish "Players’ Clubs” or similar programs that provide rewards to customers for repeated play?
A: Tracking systems and Players Clubs that connect in any way to the VGT may be authorized in the future but are prohibited at this time. Terminal Operators and/or Licensed Video Gaming Locations are permitted to collect, on a voluntary basis, player contact information to be used in connection with promotional mailings, etc., and may utilize that contact information to conduct giveaways. However, pay particular attention to the IGB’s Inducement Policy, on the IGB’s website, to avoid any violations.
Q: Are concealed weapons allowed in my restaurant?
A: Due to the Firearm Concealed Carry Act, restaurants whose gross receipts are more than 50 percent alcoholic liquor within the prior three months, have a duty to prohibit persons from carrying guns into their licensed establishment. As part of this obligation, liquor license holders may post a sign which clearly communicates that carrying a gun is prohibited on the licensed premises. To print out a sign, please visit the Illinois State Police Requirements for Concealed Carry Signage.
Q: Are there local laws?
A: Some local municipalities, including the City of Chicago, have prohibited the carrying of guns in all liquor licensed establishments. Liquor license holders in Chicago should post the required sign immediately.