For businesses who applied for COVID-related employee retention tax credits (ERTC) in 2021, there may be a severe cash flow challenge occurring for those waiting an average 6 to 10 months to receive the ERTC payment. Under ERTC rules, an eligible restaurant cannot take normal federal tax deductions for 1) payroll expenses and 2) healthcare group benefit expenses during the applicable calendar quarter if those payments were considered eligible wages for ERTC. While this increases the restaurant’s tax liability, the restaurant would have those costs more than offset by an ERTC payment.
However, the restaurant may face a liquidity crisis if the federal tax bill is due before receiving an ERTC payment. Members are advised to plan for this scenario if they fall into this criteria. On Nov. 15, 2021, the National Restaurant Association urged the IRS and Department of Treasury to speed ERTC payments and delay related taxes. A national grassroots petition on these ERTC recommendations has over 5,300 signatories, and we encourage members to add their name.
The Association also strongly supports the bipartisan “Employee Retention Tax Credit Reinstatement Act” (H.R. 6161). The bill, introduced by Reps. Carol Miller (R-WV) and Stephanie Murphy (D-FL), would restore the fourth quarter of ERTC.
As you know, earlier this year the Department of Labor released new tip credit regulations (also referred to as the “dual jobs” or “80/20”) that govern pay for tipped employees of restaurants. This new regulation became effective on December 28. The Labor Department has exceeded its authority in releasing these rules, and the impact of the rules will be a definite net-negative for the restaurant industry. In November, the National Restaurant Association’s Restaurant Law Center and the Texas Restaurant Association filed an emergency lawsuit in a Texas federal court challenging the rules and asking for an immediate injunction while the case is being considered. Unfortunately, we expect the court will allow the new regulations to remain in effect at least until we appear in court sometime in February.
The new tip credit regulations devise three different categories of work, which impact the wage a restaurant can pay a tipped employee: “tip-producing work”, “directly supporting work”, and work that is “not part of the tipped occupation”. Importantly, under the new tip credit regulations, restaurants cannot take a tip credit for the time spent on tasks considered “directly supporting work” that exceeds 20% of the workweek or 30 continuous minutes.
At this time, it is important that our members continue to take steps to comply with the new tip credit regulations. Actions to consider taking include conducting an audit of the job duties performed by your tipped employees, training your managers on the new requirements, implementing new policies and procedures on side work, changing your staffing model to hire new staff to perform side work tasks, and adopting new timekeeping protocols for tipped employees.
We and our partners at the National Restaurant Association will present a webinar in early January on the substance of the new regulations and take questions on best practices for compliance. Stay tuned for more details.
On October 28, 2021, the U.S. Department of Labor (DOL) announced publication of a final “dual jobs” rule, which reverses course from a December 2020 final rule and resurrects the so-called “80/20 Rule” that governs how tipped employees must be paid under the Fair Labor Standards Act (FLSA). When the proposed rule was announced earlier this year, several stakeholders, including Littler’s Workplace Policy Institute (WPI), submitted detailed comments to the DOL explaining why they believed the latest version of the 80/20 Rule was ill-focused, inconsistent with the FLSA, and unworkable in practice. While some of those comments resulted in improvement to the final rule, the DOL elected to discount or disregard some of the key concerns identified.
The final rule becomes effective December 28, 2021, and the Restaurant Law Center and the Texas Restaurant Association have filed a lawsuit (read more here) recently. Read the summary of the final rule and its implications here.
Restaurant Business Conditions
Starting Jan. 3, 2022, proof of vaccination or a negative test will be required for everyone ages 5 and up at restaurants and public places. Children will have to show proof of at least one dose, and proof of two doses starting in February.
This means parents have a week to begin a vaccine series for their children if they want to go to restaurants or visit public places in New Orleans.
"Starting in January you need to start getting your children vaccinated," Cantrell said.
Cantrell said that the move was made to keep people safe ahead of the holiday seasons as well as for Carnival Season. This comes as the omicron variant continues to spread across the city of New Orleans. Dr. Jennifer Avegno with the New Orleans Department of Health said average cases have nearly doubled. Omicron is expected to become the dominant strain here locally by the New Year.
The vaccine is at least 70% effective against omicron, which is down from at least 90% against delta. Avegno stressed the importance of booster shots during this time in increasing effectiveness.
Health officials said while 80% of the adult population in New Orleans is fully vaccinated, the numbers are much lower for those ages 5-17. They are 27% fully vaccinated.
Given what we currently know about COVID-19 and the Omicron variant, CDC is shortening the recommended time for isolation from 10 days for people with COVID-19 to 5 days, if asymptomatic, followed by 5 days of wearing a mask when around others.
The change is motivated by science demonstrating that the majority of SARS-CoV-2 transmission occurs early in the course of illness, generally in the 1-2 days prior to onset of symptoms and the 2-3 days after. Therefore, people who test positive should isolate for 5 days and, if asymptomatic at that time, they may leave isolation if they can continue to mask for 5 days to minimize the risk of infecting others. Read more here.
On Friday, December 17, the U.S. Court of Appeals for the Sixth Circuit dissolved the Fifth Circuit’s stay of the Vaccination and Testing Emergency Temporary Standard (ETS). The Department of Labor (DOL) and the Occupational Safety and Health Administration (OSHA) can now resume implementing this vital workplace health standard. The ETS establishes requirements to protect employees of large employers (100 or more employees) from the risk of contracting COVID-19 in the workplace.
To account for any uncertainty created by the stay, OSHA is exercising enforcement discretion with respect to the ETS compliance dates. To provide employers with sufficient time to come into compliance, OSHA will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard.
The Department of Labor will provide two briefings this week with senior DOL and OSHA officials to discuss recent developments and updated guidance related to the rule. A prerecorded webinar on the content of the ETS is available here. Attendees are encouraged to review guidance and information from OSHA ahead of the briefing and submit questions using the RSVP links below.
ETS Briefing schedule:
More information on the ETS can be found at these links:
OSHA has just spoken regarding its enforcement intentions. It has pushed both initial ETS effective dates out 5 weeks, so instead of Dec. 6 and Jan. 4, covered employers will have until Jan. 10 and Feb. 9. Here it is in full from their website:
“OSHA is gratified the U.S. Court of Appeals for the Sixth Circuit dissolved the Fifth Circuit’s stay of the Vaccination and Testing Emergency Temporary Standard. OSHA can now once again implement this vital workplace health standard, which will protect the health of workers by mitigating the spread of the unprecedented virus in the workplace.
To account for any uncertainty created by the stay, OSHA is exercising enforcement discretion with respect to the compliance dates of the ETS. To provide employers with sufficient time to come into compliance, OSHA will not issue citations for noncompliance with any requirements of the ETS before January 10 and will not issue citations for noncompliance with the standard’s testing requirements before February 9, so long as an employer is exercising reasonable, good faith efforts to come into compliance with the standard. OSHA will work closely with the regulated community to provide compliance assistance.”
National Restaurant Association releases annual What’s Hot survey revealing top menu trends for the year ahead
Restaurant customers can expect to see health taking center stage on restaurant menus in 2022. The National Restaurant Association today released its annual What’s Hot Culinary Forecast, which offers a detailed look at the topics, trends, and products expected to drive restaurant menus in the coming year across a variety of categories including daypart occasions, menu categories, beverages, flavors, global inspirations, packaging/off-premises trends and industry macro-trends.
After demand for comfort food surged during the height of the pandemic, consumers are refocusing on better-for-you options, with foods that are believed to have immunity-boosting qualities and plant-based sandwiches making up three of the Top 10 Trends for 2022. Plant-based proteins are growing increasingly popular on menus and less expensive cuts of protein, such as thighs instead of wings, will have a greater presence in the year to come.
Sustainability will continue to influence menus and how restaurants make decisions across the board. From reusable and recyclable packaging to zero-waste options, restaurants are continuing to prioritize sustainable initiatives. As consumers continue to utilize off-premises options in all dayparts, restaurants are looking to translate their dine-in experience outside the four walls of the restaurant with thoughtful packaging that maintains food quality, retains temperature, and is tamper-proof.
“In addition to a return to health-focused menu offerings and more eco-friendly, improved off-premises packaging, all of which rated high in the top trends, we’re expecting operators to look across their menus for transformative opportunities,” said Hudson Riehle, Senior Vice President of the Research & Group for the Association. “Look for trends that fuse the traditional meal daypart items with other dayparts and an increasing popularity of snacking and its allied items. Also, with the popularity of cocktails-to-go during the pandemic, restaurants will look to expand both alcoholic and non-alcoholic craft beverage options.”
Menus will become more refined and streamlined going into the year ahead, while chefs anticipate alcohol-infused desserts, globally inspired items, and even upscale potato chips to find spots on the menu.
The What’s Hot survey was conducted in October 2021. More than 350 professional chefs of the American Culinary Federation rated 109 food items and culinary concepts compiled by Association experts and Technomic’s Menu Research & Insights Division. Download the full report here.
The IRS issued guidance for employers assuming eligibility for the employee retention tax credit (ERTC) in October – December 2021, the fourth calendar quarter. Employers who received an advanced ERTC payment or reduced their employment tax deposits can repay or deposit the taxes without penalty, recognizing one of the requests by the National Restaurant Association in a November 15 letter. The enactment of the Infrastructure Investment and Jobs Act terminated the ERTC for the fourth quarter.
Employers that reduced federal tax deposits for wages paid during the fourth quarter can have penalties waived for deposits due before Dec. 20, 2021 as long as they meet three criteria:
To learn more, register for next week’s webinar: How the Employee Retention Tax Credit Has Changed in Q4 and Ways to Prepare for 2022, December 16 at 2pm ET.