I was fortunate to speak on a panel earlier this week on the “State of the Union: Exploring 2019 Labor Challenges” at the Financial Leadership Exchange for foodservice CFO’s and financial executives in Sun Valley, ID. As part of the exchange, and the panel I was on, there were a few overriding issues that were a common theme throughout the conference. This Friday’s Five covers the top five themes related to labor and employment that were consistently discussed during the exchange:
1. Employment costs are a concern.
One of the top three concerns for operators, if not the first concern, is the increasing employment costs across the nation. This increase in cost is not only from increasing minimum wages, but also from scheduling mandates (see below), paid sick leave and other forms of paid time off, joint employer issues, employee training mandates, and other regulations directed at the hospitality industry. On top of these issues, employers face threats of employment related litigation and the costs associated with defending against these claims.
2. California’s new law, AB 5, limiting use of independent contractors likely has an impact on restaurants.
While the hospitality industry is still trying to understand how third-party delivery systems such as Postmates, DoorDash, and Uber Eats fit into the business model and if these types of companies are sustainable long term, they are a major part of the landscape for now. California’s AB 5, signed by Governor Newsom on September 18, 2019, codifies the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court, and is directed at restricting companies from classifying workers as independent contractors in the gig economy.
As I was quoted in Nation’s Restaurant News last week, the costs for food delivery through these platforms will have to increase if the drivers are classified as employees, and ultimately, the consumer will have to pay more for this service. As noted in the article by Alex Canter, of Canter’s Deli, the delivery services will likely look towards automation to make deliveries in the future.
3. Scheduling mandates, often called fair work week or predictive scheduling, has many unintended consequences for the hospitality industry.
While not a law in California, other states and local cities have passed scheduling mandates that require employers to set schedules for employees well in advance, and if the employer changes the schedules within a certain time frame, the employer must pay a penalty for the change. There has been proposed legislation in California for this type of law, but as of 2019, none of these bills have passed. For example, in 2016, California’s legislature drafted SB 878 that proposed to require retail establishments, grocery stores, and restaurants to set employees schedules 28 days in advance, and impose penalties on the employer if the schedule is modified by the employer.
4. Software to manage a workforce is critical.
Automation such as driverless cars, drones, and robots as servers may still be a thing for the future (but not that far-off as noted below), but employers are quickly realizing that software to manage routine workforce matters are available and the industry leaders are already utilizing these services. Items such as onboarding employees, scanning employment files, having platforms that all employees can effectively communicate across electronically, and employee training can all be done easier and more efficiently with the use of software.
5. Automation is a potential solution.
As mentioned above, automation and adapting to new technology is becoming essential in being able to remain competitive going forward. While it may sound improbable, companies like Miso Robotics are developing technology that many people only recently thought would be unattainable. For example, Miso Robotics created Flippy, a robot that can work a grill or fryer. It will be interesting to see how quickly automation technology develops.
(Photo Credit: Miso Robotics)