Restaurant Labor Law Changes in 2026
A 2026 overview of restaurant labor law changes - minimum wage, overtime, tips, scheduling rules, leave, minors, posters, and records.
Overview
Labor laws can change from year to year, and 2026 includes updates that can affect restaurants in real, day-to-day ways - how much you pay, how you schedule, how overtime is calculated, how tips are handled, and what records you must keep. The tricky part is that the rules don't come from just one place. Restaurants may need to follow federal rules, state laws, and sometimes city or county ordinances that set higher standards than the state.
This article gives a simple overview of the main labor law areas restaurant owners should watch in 2026. It covers minimum wage changes, overtime and exempt rules, tipped wage and tip pooling rules, predictive scheduling and break requirements, paid leave updates, minor labor restrictions, and the posters and recordkeeping that help you stay compliant. If you run more than one location, these changes matter even more - because the requirements can be different depending on where each restaurant is located.
Minimum Wage, Local Wage Floors, and Tipped Cash Wages
For most restaurants, wage updates are the first labor-law change you feel - because they immediately affect payroll, labor targets, menu pricing decisions, and hiring offers. In 2026, many states raised their minimum wage on January 1, and in some areas city/county rates are higher than the state rate. The practical rule is simple - pay the highest minimum wage that applies to the employee's work location (federal vs state vs local).
What changed in 2026
Here are a few 2026 increases that show the typical pattern owners need to plan for -
1. California.$16.90/hr starting Jan 1, 2026 (up from $16.50, +40 cents).
2. Washington.$17.13/hr starting Jan 1, 2026 (up from $16.66, +47cents).
3. Connecticut.$16.94/hr starting Jan 1, 2026 (up from $16.35, +59 cents).
4. Arizona.$15.15/hr starting Jan 1, 2026 (up from $14.70, +45 cents).
5. Colorado (state level, if no higher local rate applies). $15.16/hr in 2026 (up from $14.81, +35 cents). Colorado also lists a 2026 "with tip credit" rate of $12.14/hr where tip credit is allowed and no higher local wage applies.
6. Hawaii.$16.00/hr starting Jan 1, 2026 (up from $14.00, +$2.00 cents).
7. New York (tiered by region). $17.00/hr in NYC, Long Island, and Westchester on Jan 1, 2026 (up from $16.50, +50 cents). $16.00/hr in the rest of New York State on Jan 1, 2026 (up from $15.50, +50 cents)
8. New Jersey. $15.92/hr on Jan 1, 2026 (up from $15.49, +43 cents)
9. Michigan. $13.73/hr on Jan 1, 2026 (up from $12.48, +$1.25)
10. Minnesota. $11.41/hr on Jan 1, 2026 (inflation adjustment - Minnesota also lists a 90-day training wage for workers under 20)
Don't miss local wage floors
Local ordinances can change your labor cost picture overnight. For example, Denver's local minimum wage is $19.29/hr in 2026, which is far above Colorado's statewide rate. If you operate multiple locations, you may need different wage tables by city - even within the same state.
What you should update right away when wages change
1. Payroll rates by location and job code (including tipped configurations where relevant).
2. Job postings and offer letters so advertised pay never falls below the applicable minimum.
3. Labor models and schedules (small hourly increases can materially shift labor % targets).
4. Workplace postings/notices that must reflect current wage rules in your jurisdiction(s).
Overtime and Exemptions in 2026
Overtime rules are one of the most common places restaurants get caught off guard, because the requirements can change depending on where you operate and how you classify managers and supervisors. At a basic level, federal law requires overtime after 40 hours in a workweek for nonexempt employees. But some states go further and require daily overtime (for example, overtime after working more than a certain number of hours in a single day). If you run multi-state locations, this is where "one policy for everyone" usually breaks.
The biggest 2026 risk
Paying a manager a salary does not automatically make them overtime-exempt. Exempt status generally requires both (1) a qualifying job duties test and (2) meeting a minimum salary threshold. In 2026, that threshold is not the same everywhere -
- Federal baseline still uses the familiar weekly salary requirement (and a separate annual amount for "highly compensated employees").
- Some states set higher exempt salary thresholds than the federal level, and several of those increased on January 1, 2026. New York is a clear example - its weekly salary thresholds for certain exempt categories are far above the federal baseline. Colorado also uses a higher exempt salary figure under its state rules.
If a salaried employee does not meet the correct threshold (or doesn't pass the duties test), they may need to be treated as nonexempt and receive overtime - even if you've always called the role "assistant manager."
Overtime calculations
Restaurants often miscalculate overtime when they forget that overtime is based on the employee's regular rate, which can include more than just the base hourly wage. A few common examples that can change the regular rate -
- Nondiscretionary bonuses (like attendance bonuses, productivity incentives, or guaranteed performance bonuses)
- Multiple job rates in the same week (server + trainer rate, cook + shift lead rate)
- Certain differentials or payments that must be included in the regular-rate math
Practical compliance checklist
1. Recheck who is exempt vs nonexempt (especially GMs, assistant managers, shift leads).
2. Confirm your salary thresholds by state (and city/local rules if applicable).
3. Validate overtime calculations when pay isn't "just hourly" (bonuses, multiple rates).
4. Train managers to avoid common violations (off-the-clock prep/cleanup, missed punches, "just answer a quick text," unpaid training).
Tip Credit, Tip Pooling, and Service Charges
Tips are a major compliance area for restaurants because the rules affect how you pay, who can share tips, and how you document tip practices. In 2026, the safest approach is to separate your policies into four clear buckets - tip credit, tip pooling, service charges, and side work (dual jobs).
A) Tip credit basics (where allowed)
If your state allows a tip credit, the general idea is - you can pay a lower cash wage as long as the employee's cash wage + tips still equals at least the applicable minimum wage, and overtime is paid correctly based on the rules that apply. The operational risk is usually not "math" - it's missing the required employee notice and not tracking tips consistently.
B) Tip pooling and who can participate
In 2026, one of the most important rules is that managers and supervisors cannot keep other employees' tips and generally cannot take money from a tip pool or tip jar. Even if a manager helps on the floor during a rush, they should not be included in a pool that contains other employees' tips. A clean way to manage this is to define roles clearly and keep tip pools limited to eligible, non-manager positions.
C) Service charges vs tips
A tip is something the customer chooses to leave. A service charge (like an automatic 15% added to a bill) is not a tip under federal rules. That difference matters because service charges are treated more like wages - they can affect wage and overtime calculations and must be handled carefully on pay stubs and in payroll reporting. If you use automatic gratuities for large parties, your menu wording and receipts should clearly label them as service charges (if that's what they are).
D) Side work and "dual jobs"
Federal guidance in this area has been moving, but the practical takeaway for restaurants is simple - if you take a tip credit, you should track and manage non-tipped side work (prep, stocking, cleaning) so employees aren't spending excessive time on non-tipped duties while being paid a tipped cash wage. Use clear shift checklists, time rules, and manager approvals to keep side work reasonable and documented.
Quick compliance checklist
1. Confirm whether your state allows a tip credit and what the minimum cash wage must be.
2. Put tip rules in writing - how tips are collected, distributed, and when employees receive them.
3. Keep managers/supervisors out of tip pools and tip jars that include other employees' tips.
4. Label service charges correctly and run them through payroll appropriately.
5. Set side-work guardrails (tasks, time expectations, documentation).
Predictive Scheduling, Last-Minute Changes, and What to Document
Scheduling is a labor-law hot spot in 2026 because several jurisdictions have rules that go beyond "make a schedule and post it." These laws are often called predictive scheduling or fair workweek rules. They mainly apply to larger employers (sometimes based on total company size or number of locations), but when they apply, they can add real costs if you change shifts late.
What these laws usually require
While the details vary by location, most predictive scheduling rules include some version of -
- Advance notice schedules (often about two weeks ahead)
- A written good-faith estimate of expected hours for new hires
- Premium pay when you add hours, change a shift, cancel shifts, or send someone home early after they report
- Rules about on-call shifts and compensation if the employee isn't used
- Rules about rest time between shifts ("clopening") in some places
- Recordkeeping obligations so you can prove compliance
Practical examples owners run into
- Oregon has a statewide predictive scheduling law for covered employers in industries that include food service/hospitality, with requirements tied to advance notice and compensation for changes.
- Seattle requires certain large food service and retail employers to pay set amounts when shifts are changed, when hours are added, when employees are sent home early, or when on-call shifts aren't used - and it also requires keeping records for multiple years.
- Chicago expanded coverage for its Fair Workweek rules to more employees (including restaurants) and uses pay thresholds to determine which workers are covered.
What to do in 2026
1. Confirm coverage - For each jurisdiction you operate in, confirm whether your brand/location is covered (size, industry, and sometimes number of locations).
2. Set a scheduling rule internally - build your process around a two-week schedule window, even if your area requires less.
3. Control last-minute changes - require manager approval for edits after posting, and track the reason (call-out, sales drop, equipment issue).
4. Code premium pay cleanly - create payroll codes for "schedule change premium," "send-home premium," "on-call not used," etc.
5. Keep the proof - store posted schedules, schedule edits, employee consents, and premium pay records in one place.
Leave, Breaks, and Workplace Accommodations
Leave and break rules are easy to miss because they rarely show up as a single "big announcement," but they can create real risk for restaurants - especially when managers handle requests inconsistently. In 2026, the safest approach is to assume you may be dealing with three layers of rules at once - state paid leave requirements, state or local break rules, and workplace accommodation rules that require time and space adjustments (like lactation needs or certain disability-related accommodations).
Meal and rest breaks
Some states tightened break rules starting January 1, 2026. Minnesota is a strong example - employers must allow a 15-minute rest break within each four consecutive hours worked, and a 30-minute meal break when an employee works six or more consecutive hours. If you operate in Minnesota, the practical impact is scheduling and coverage - your shift plans need to assume breaks are real, predictable time blocks, not "when we get to it."
Paid leave (the "policy mismatch" problem)
Paid leave laws vary widely. Some states require paid sick leave, and others have paid leave usable for broader reasons. This matters because your policy language (and manager training) needs to match what the law allows. Common problem areas include -
- Accrual vs frontloading (and what happens at year-end)
- Waiting periods before use
- Carryover rules and annual usage caps
- What documentation you can request (and when)
- Required notices/posters and employee notifications
What restaurant owners should do
1. Create a single "Leave & Breaks" policy page that managers can follow (what to approve, what to track, when to escalate).
2. Set payroll codes for leave types (sick, paid leave, unpaid protected leave, break premiums if applicable).
3. Train managers on consistency - approving leave, avoiding retaliation language, and documenting schedule changes tied to leave.
4. For breaks, build coverage into the schedule (don't rely on "we'll figure it out").
5. Keep clean records - leave balances, approvals/denials, break attestations (if used), and any required notices.
Hours, Duties, and Scheduling Safeguards
Hiring teens can be a big win for restaurants - especially for hosts, bussers, counter staff, and entry-level prep roles - but minor labor rules are strict and vary by state. In 2026, the biggest compliance risk is assuming that "if the employee is available, we can schedule them." In reality, minors often have limits on how late they can work, how many hours they can work, and what tasks they can do - and those limits may change based on whether school is in session.
What to check every time you hire or schedule a minor
1. Age category matters (example. 14-15 vs 16-17), because younger minors usually have tighter hour restrictions and more prohibited tasks.
2. School vs non-school weeks can change max daily and weekly hours, and some states also restrict work during school hours.
3. Time-of-day limits are common (for example, restrictions on late-night work on school nights).
4. Prohibited duties are a major risk area in restaurants. Many rules limit minors from using certain equipment (like power-driven machines) or performing hazardous tasks, even if the employee is trained and supervised.
5. Work permits and documentation may be required depending on the state and the minor's age.
Why restaurants get flagged
- Scheduling a minor past the permitted cutoff time, especially when a closing shift runs late.
- Asking minors to "help out" with tasks that involve restricted equipment or hazardous cleanup.
- Relying on verbal approvals instead of keeping the required documentation.
- Letting scheduling changes happen informally (swaps, staying late, coming in early) without checks.
Practical safeguards that work in 2026
- Create minor-friendly job templates (approved duties by role- host, cashier, busser).
- Use scheduling guardrails. Hard stops for end times, max hours, and school-night rules.
- Require managers to log exceptions (why a minor stayed late, who approved it, and how time was paid).
- Keep a simple "minor compliance packet" for each employee. Proof of age, work permit (if required), role restrictions, and scheduling limits.
Done well, minor labor compliance is less about memorizing laws and more about putting basic controls into hiring, scheduling, and daily shift management.
Posters, Notices, and Recordkeeping
Even when you pay the right wage and schedule correctly, restaurants still get into trouble when they can't prove it. In 2026, strong compliance is as much about posters, notices, and records as it is about day-to-day operations. The good news - if you set up a simple system, this becomes routine.
A) Posters and required notices
Most restaurants must display certain workplace posters where employees can easily see them (break area, near timeclock, or onboarding station). Posters often update when minimum wage increases or when a state changes its leave rules. Beyond posters, some jurisdictions require written employee notices - for example, wage notices at hire, paid leave notices, or scheduling notices. If you operate multiple locations, don't assume one poster set covers everyone; local ordinances can require additional postings.
Practical tip - do a quarterly poster audit and a January audit (because many wage changes take effect January 1).
B) The records restaurants should always be able to produce
Recordkeeping is where many investigations start. Common items requested include -
- Time records (clock-in/out, meal breaks, edits, who approved edits)
- Pay records (pay stubs, wage rates, overtime calculations)
- Tip records (tips received/reported, tip pool distributions, tip credit notices if used)
- Schedules (posted schedule, any changes after posting, employee consents where required)
- Leave records (balances, accrual calculations, requests, approvals/denials)
- Minor documentation (proof of age, permits if required, role restrictions)
C) What to standardize in 2026
1. One compliance folder per location (digital preferred) with consistent subfolders - Wages, Timecards, Tips, Schedules, Leave, Minors, Posters.
2. A schedule change log - every change after posting gets a reason + manager approval.
3. A time edit rule - edits require a note and cannot be done "quietly" without a record.
4. A monthly spot-check, pull 3-5 employees and verify wage rate, overtime, breaks, tips, and any leave usage.
When you have these basics in place, you reduce risk fast - because you can respond to questions with clear documentation instead of guesswork.