How to Decide If A Restaurant Employee Should Pay for A Mistake

This content is for informational purposes only and is not intended as legal, accounting, tax, HR, or other professional advice. You are responsible for your own compliance with laws and regulations. Contact your attorney or other relevant advisor for advice specific to your circumstances.

Wages are just one of the expenses included in the cost of having a restaurant staff. Aside from common outlays for uniforms or staff meals, there are other unforeseeable expenses: broken glasses, overcooked meat, wrongly comped meals. These mistakes can hurt a restaurant’s  bottom line — but they don’t have to. 

When budgeting for the planned costs and inevitable mishaps that come with staffing a restaurant, there’s a fine line between making staff feel cared for and giving them so much leeway that it hurts profit margins. 

In this piece about when and why it's appropriate to make an employee pay for a mistake, we’ll cover: 

1. Common pay deductions seen in restaurants. 

2. The legality around paycheck deductions for mistakes made on the clock.

3. How to decide if a pay deduction is the best option.

4. Job-related expenses you can ask employees to budget for.

Common Pay Deductions Seen in Restaurants

Accidents happen in the kitchen, on the floor, and behind the bar — and most of the time, no one is at fault. But regardless of fault, the price of these errors can add up quickly, putting restaurant owners and managers in a tough spot. More often than not, they are the ones covering the costs of such mistakes.

Some things that may result in a paycheck deduction for restaurant staff: 

• Broken dishes

• Guests walking out on their bill or tab

• A shortage in the cash drawer at the end of a shift

• Replacements for lost, damaged, or forgotten uniforms, shirts, or aprons

• Spoiled food caused by negligence

• Free meals or drinks given to friends without permission

Is It Legal to Make an Employee Pay for a Mistake? 

To help decide when  employee chargebacks are in order, it’s important to understand the federal wage and hour laws. The federal minimum wage is $7.25 an hour and, in most cases, it is not legal to make servers pay for mistakes that bring their wage below this minimum.

Many restaurant owners pay their front-of-house staff a base rate of less than $7.25 an hour, though, making up the difference by claiming a tip credit. So, if a server is paid only $2.25 an hour, the restaurant would claim a tip credit of $5.00, bringing the hourly wage up to the federal minimum. This is how it’s legal to pay tipped-wage workers a lower hourly minimum wage than non-tipped wage workers. That tip credit must be paid, even if an employee doesn't collect enough tips to cover it. 

And even if their tips exceed the amount needed to cover the tip credit, that excess still cannot be dinged for chargebacks. According to the U.S. Department of Labor and the Fair Labor Standards Act, a tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit. With the one exception of tip pooling or sharing arrangements among employees, the employee may not be required to turn over their tips to their employer.

Consequently, it is often difficult to charge employees for out-of-pocket expenses without violating the federal wage laws. Some states have laws that further restrict when and how deductions for mistakes can be taken, so managers and owners will also want to be mindful of those when considering how to implement a chargeback policy.  

How to Decide If a Pay Deduction Is the Best Option

Managers can usually make the call whether a mistake was simply accidental, or the result of negligence. In the former case, it engenders loyalty for the restaurant to cover the cost and not charge the employee. Most of the time, they will already be embarrassed by the incident and will have learned from it.

Either way, it’s important to address incidents quickly, while the moment is still fresh in everyone’s minds, so that a resolution can be reached without allowing bad feelings to fester. It’s always best to have a one-on-one meeting with your staff member to go over what happened and come to an understanding about how to address the mistake. Even if you’re fuming, don’t try to make an example out of one employee’s mishap. To avoid shaming them in front of their peers, take a moment to collect yourself before addressing the issue — cooler heads can iron things out much more effectively.

This system works for accidents, but you’ll need different policies to address intentional bad behavior. A server who writes an extra zero on a tip, slips a bottle of champagne into their backpack, or comps meals for friends without authorization has committed willful theft, and it is within your rights to fire them, or even pursue criminal charges against them.

Job-Related Expenses Employees Should Budget For 

Mistakes, blunders, and other general employee-related restaurant expenses should be a line item in your operating budget — you don’t want to be caught without the funds when you need them, even if the use-cases only pop up occasionally. That said, there are a few things you can ask employees to pay for.

As previously stated, employee-related restaurant expenses are only eligible to be taken out of a staff member’s paycheck if the deduction does not push the employee’s hourly pay below the minimum wage. The following employee-related restaurant expenses may be worth a pay deduction, but should be planned with clear communication so staff aren’t caught off guard.

1.  Staff uniforms

Under federal law, restaurants are permitted to require employees to wear a uniform, as long as it is not discriminatory. For example, a restaurant cannot require women to wear a more expensive uniform than that required of men. 

If the restaurant is providing the uniform, they may deduct its cost from employee pay as long as the deduction does not push pay below minimum wage — and as long as their state law permits it. Some states bar restaurants from charging employees for uniforms that carry the restaurant’s name or logo and that wouldn’t qualify as street clothes.

Restaurants can also deduct the cost of maintaining uniforms, such as by dry cleaning them, from employee pay. Uniform costs can be prorated over several paychecks to avoid pushing an employee’s pay below minimum wage, but employees who earn only minimum wage (including any tip credit) can’t be required to cover these costs.

 2. Credit card fees

According to Restaurant Business magazine, it’s legal to deduct credit card fees (often 2 or 3 percent) from employee tips when a tip is placed on a credit card. As with most cases, this rule only applies if deducting that cost will not push the employee’s pay below the minimum wage.

3. Staff meals 

Many restaurants ask staff to be present for a family meal, and some restaurants offer a meal during employees’ breaks. According to the nonprofit Workplace Fairness, the cost of these meals can be deducted from employees’ paychecks, even if doing so drives the employee’s pay below the federal minimum. There are, however, a few exceptions to this rule. If an employee does not want a meal, they can’t be charged for it. Employees also cannot be charged for meals provided for the restaurant’s convenience, as when meals are offered to minimize employees’ break times. In any event, the amount deducted for a provided meal cannot be the amount the public is charged for that meal; employees should only be charged cost, with no markup.

4. Classes, courses, and certifications 

To be compliant with health codes, some restaurants may require staff members to complete trainings and earn certifications before taking a job or getting a promotion within the company. For example, some states require bartenders to have a state-issued bartending license, or a restaurant’s insurance company might require servers to have a TIPS (Training for Intervention ProcedureS) certification. Similarly, restaurant management staff is often required to take a ServSafe food safety and sanitation training, and food trucks and carts in some municipalities require a specific kind of food handling certificate unique to mobile food. 

When training courses are required as a prerequisite for employment, a restaurant owner is under no obligation to pay for the training. However, if a restaurateur requires an existing employee to take a training course on the job, either to remain compliant or to prepare the employee for a new role, federal law says the employer must pay the employee at their regular hourly rate for the time spent in the training. State law may differ from federal here, so be sure to check whether out-of-pocket costs for a training or certification can be passed on to the employee in your area.

Within the Law, You Decide What’s Fair

Great employees who show up on time, love what they do, and make customers happy with their work are the best thing a restaurant manager could ask for. Likewise, staff deserve managers and owners who treat them well, so be sure to have a conversation with your employees before considering any pay deductions.

If you still have questions, you can seek out guidance from a lawyer specializing in labor and employment. While there are federal standards for these things, many states have even more restrictions — it’s crucial to be aware of these guidelines and follow any specific rules in place in your area.

Ultimately, it’s up to you how much of your expenses you pass on to your staff. When your employees feel cared for and permitted to make the occasional mistake on the learning curve of the restaurant business, it has a positive effect on staff retention. Keep this in mind when deciding how much to charge employees for mistakes, and make sure your decisions reflect a commitment to the best outcome for all parties involved.