New Laws Impact Local Restaurants

Someone cutting green vegetables on a white cutting board. Cut up mushrooms and meat can also be seen.
Experts on Colorado restaurant law speak out about issues these establishments face. / Photo by Jonathan Borba on Unsplash.

As COVID-19 cases continue to stay relatively low, Colorado restaurants are back open for business as they work to lure customers back. But many issues are still at the forefront for these establishments including rising wages and staffing.

Beth Ann Lennon, a labor and employment attorney and member at Sherman & Howard, said it’s been a crazy couple years in Colorado for businesses like restaurants. 

Lennon said a major hurdle restaurants are dealing with is the new Healthy Families and Workplaces Act. The state is still under a public health emergency, according to the Colorado Department of Labor and Employment. Currently, employers need to provide employees with up to two weeks of paid leave for COVID-19-related issues one time per public health emergency. As of Nov. 11, it also applies to the flu, respiratory syncytial virus and other respiratory illnesses. According to the CDLE, employees can use the paid leave up to four weeks after the emergency ends.

“All of these restaurants are still navigating public health emergency-related absences and scheduling around those,” Lennon said.

Another issue restaurants deal with is local minimum wage increases and tip offsets. In 2023, minimum wage across the state will increase from $12.56 to $13.65 and local governments have the option to increase it even higher according to state law. In Denver, for example, the minimum wage will increase to $17.29 from $15.87.

For tipped employees, the minimum wage works a little differently. Tips can be used to offset wages. For example, if a server makes Denver’s minimum wage of $17.29 next year and the employer claims the full hourly tip credit of $3.02, the employee would be making $14.27 an hour plus tips. In order for an employer to get a tip credit, you can’t have a tip pool that includes non-traditionally tipped employees. 

“All of the restaurants that are operating here in Denver … [are] trying to navigate exactly how much they have to pay and how much of a line-item those added wages are,” Lennon said. She added restaurants are also already dealing with staffing and scheduling issues.

On the federal level, Lennon said they aren’t seeing a lot of new laws, but the Department of Labor has been spending more time focusing on tipped employees, what a restaurant can do with those tips and how they have to be paid out. For example, there are lots of implications under federal law for tip pools like managers not being a part of them.

“For my restaurant clients that I have worked with, it’s the uncertainty and the ever-changing interpretation that’s most difficult,” Lennon said. “They’re trying to run their business and they’re trying to set up a system that is best for their employees and it feels like every five minutes there’s a new guidance coming out about what is or is not permissible.”

Multiple laws connected to the restaurant industry were also highlighted by the Colorado Restaurant Association.

“After two-plus years of operational restrictions, revenue losses, business closures, and dampened consumer spending due to the COVID-19 pandemic, 2022 has been a year of relatively normal operations for Colorado restaurants – although operating amidst skyrocketing inflation and a severe labor shortage is anything but normal,” wrote Nick Hoover, the manager of government affairs for the CRA.

One bill recently passed by the Colorado General Assembly involved unemployment compensation. That law was used to deal with increased usage in unemployment insurance claims from COVID-19, according to the CRA, leading to the dedication of $600 million from the American Rescue Plan Act of 2021. 

The law states the money is transferred to a newly created fund to be used only to repay the outstanding balance of federal advances to the state through the unemployment trust fund. Hoover wrote the law helps stabilize employer premiums and saves restaurants some of the costs associated with bringing the depleted fund back to solvency.

A sales tax law was also passed by the Colorado General Assembly this past session. The act renewed for July, August and September a temporary deduction from state net taxable sales for retailers like restaurants. The temporary deduction for retailers was equal to the lesser of state net taxable sales or $70,000 for each month the deduction is allowed, according to the law. Hoover wrote the law could save restaurants up to $2,000 per month during that time period.

Hoover cited various laws that could impact restaurants in 2023 including the increase in the minimum wage and the paid family and medical leave insurance program. According to the program, employers and employees will contribute premiums beginning in 2023. Employees could start seeing FAMLI premium deductions on pay stubs beginning Jan. 1. The program will provide benefits beginning Jan. 1, 2024. 

2023 isn’t going to be easy for local restaurant operators, but the CRA will be here to advocate for them at all levels of government as it has been since 1933,” Hoover wrote.

According to the CRA, there are more than 240,000 restaurant employees in the state in 2022 at more than 12,400 locations.

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