State and Federal Government Agencies That Regulate Your Restaurant
To help you understand the functions of the various state and federal government agencies that regulate your business, CRA presents this report.
Because California employers have compliance obligations to most of the government organizations summarized below, CRA provides you with the following overview of the basic structures and purposes of these agencies.
State Government Agencies
Department of Alcoholic Beverage Control (ABC) State of California
If you wish to sell alcoholic beverages, you must have a license to do so.
The ABC Department has the exclusive power to license and regulate the manufacture, importation, and sale of alcoholic beverages in California. It also has the authority to deny, suspend, or revoke any specific alcoholic beverage license.
- Laws enforced/administered: Alcoholic Beverage Control Act, Alcoholic Beverage Tax Law, and various provisions of the California Penal Code, Health and Safety Code, and Vehicle Code.
- Jurisdiction/coverage: All public establishments selling alcoholic beverages, including beer and wine.
- Inspection rights: Section 25755 (b) of the California Business and Professions Code, permits ABC agents to “visit and inspect the premises of any licensee at any time during which the licensee is exercising the privileges authorized by his license on the premises.” To date, this right has been consistently upheld in cases that have challenged ABC agents’ inspection authority.
- Penalties/Enforcement: If ABC has evidence that a business has violated any laws of California through the use of its license, it can issue penalties. For example, ABC can suspend or revoke a business’s license, or seek injunctive relief. ABC can also initiate criminal or civil penalties through the local district attorney.
California Occupational Safety and Health Administration (Cal/OSHA)
Department of Industrial Relations, State of California
The Cal/OSHA department is administered by the Department of Industrial Relations (DIR), and is designed to implement the California Occupational Safety and Health Act of 1973, which provides job safety and health protection for California workers. The Occupational Safety and Health Appeals Board is a three-member body appointed by the governor to handle appeals from private and public sector employers who have been issued citations for alleged violations of health and safety laws and regulations.
- Laws enforced/administered: California Occupational Safety and Health Act of 1973.
- Jurisdiction/coverage: All California employers.
- Inspection rights: The California Labor Code provides Cal/OSHA inspectors with the right to inspect any place of employment for health and safety purposes. During an inspection, Cal/OSHA inspectors can obtain statistics, information, and physical materials directly related to the purpose of the investigation or inspection, including conducting necessary tests and taking photographs. An employer may initially refuse to permit a Cal/OSHA investigator to enter its premises until the agent can present an inspection warrant. An inspection warrant will be issued upon the showing that there is “cause” to inspect the premises. Reports of an industrial accident, injury, or illness, complaints regarding health and safety standards at the work site, or specific criteria as deemed by Cal/OSHA are sufficient to support a showing of cause to mandate the issuance of an investigation warrant.
- Enforcement: If an employer knowingly or negligently violates any order issued by the DIR or Cal/OSHA, he or she can face up to six months in the county jail or a $5,000.00 fine, or both; if an employer fails or refuses to comply with any order after a notification has been issued by Cal/OSHA or the DIR, or fails to report a work-related death, he or she can face up to one year in the county jail or a $15,000 fine, or both. The DIR or Cal/OSHA can also impose more severe penalties on an employer or manager for any willful as well as repeated violations of any occupational safety or health standard.
Department of Fair Employment and Housing (DFEH) State of California
The DFEH is the state agency charged with enforcing California’s civil rights laws. The DFEH administers the state laws that prohibit discrimination and harassment in employment, housing, and public accommodations. The DFEH administers the Fair Employment and Housing Act (FEHA), applying to public and private employers, labor organizations and employment agencies. FEHA prohibits discrimination and retaliation based on a protected category, including race, ancestry or national origin, religion, age, disability, sex, gender, pregnancy, sexual orientation, gender identify, genetic information, marital status, and military or veteran status. The DFEH also accepts and investigates complaints that allege violence or the threat of violence based on race, religion, sex, political affiliation, and other factors (covered in the Ralph Civil Rights Act). Within the DFEH, the Fair Employment and Housing Council (FEHC) promulgates the regulations to implement these state anti-discrimination laws.
- Laws enforced/administered: Fair Employment and Housing Act, Ralph Civil Rights Act, California Family Rights Act, and Unruh Civil Rights Act
- Jurisdiction/coverage: California employers with five or more employees.
- Inspection rights: When investigating complaints, the DFEH has the power to issue subpoenas to obtain records, documents, and physical materials from places of employment. The DFEH can also issue interrogatories to an employer and conduct depositions.
- Enforcement: Upon the filing of a complaint, the DFEH evaluates the facts to determine whether to accept the case for investigation. If it does, a complaint is filed and the respondent is required to answer the complaint. The DFEH then commences its own investigation. If the DFEH finds a violation of the law, the case is then moved the Legal Division. At that time, the parties are required to go to mediation. If mediation fails, the DFEH has broad authority to file a lawsuit in civil court.
Division of Labor Standards Enforcement (DLSE) State of California
This agency is headed by the State Labor Commissioner, and investigates and resolves wage-claim disputes and certain discrimination complaints on the basis of various Labor Code sections. The DLSE enforces the provisions of the Industrial Welfare Commission Wage Orders, which regulate regular wages, hours, and working conditions in California. Through its Bureau of Field Enforcement, the DLSE inspects and investigates work sites for compliance with labor laws and regulations, as well as takes enforcement action to ensure that employees are not required to work under unlawful conditions. The DLSE also has jurisdiction over the employment of special-class minors.
- Laws enforced/administered: All California Labor Code provisions.
- Jurisdiction/coverage: All California employees.
- Inspection rights: The California Labor Code provides the DLSE and Industrial Welfare Commission (“IWC”) inspection agents with authority to investigate any place of business or employment of a complainant to secure relevant information. The DLSE and IWC agents may inspect and make notes from books, reports, contracts, payrolls, documents, or papers pertaining to the complainant. After a complaint has been made, the DLSE may also issue subpoenas, written interrogatories, and requests for production of documents. It can also take the deposition of any individual that has information relevant to the complaint.
- Enforcement: After a complaint has been made, the DLSE will either refer the employee to a conference or hearing, or dismiss the claim. If the complaint proceeds to a hearing, both parties will have the opportunity to present evidence to support their claims/defense. At the conclusion of the hearing, the presiding officer will issue a decision called an Order, Decision or Award (ODA). The ODA states the amount of the award, if any. An appeal to the ODA must be filed within 10 days. If a party appeals, the California Superior Court hears the case without reviewing the decision of the Labor Commissioner.
Employment Development Department (EDD)
Health and Welfare Agency, State of California
The EDD is one of the largest government agencies in the state. Its duties are to administer unemployment and disability insurance payments to eligible claimants (i.e., the unemployed and ill), and place and train employees for private sector jobs. The EDD also handles all administrative and enforcement functions for audit and collection of Unemployment Insurance (UI), Disability Insurance (DI), employment training, paid family leave, and personal income taxes.
- Laws enforced/administered: Welfare Reform Act of 1971, Employment Security Amendment of 1970, Emergency Unemployment Compensation Act of 1971, Emergency Employment Act of 1971.
- Jurisdiction/coverage: All California employees.
- Inspection rights: Section 317 of the Unemployment Insurance Code specifies that one of the functions of the EDD is to “embrace investigation throughout the state of violations of this [Unemployment Insurance] code, to the end that its provisions are more adequately and strictly enforced.” This means that EDD officials can enter your establishment to examine record-keeping books and other papers deemed necessary in the collection of Unemployment and Disability Insurance. The EDD can also interview employees to determine if the business or employer is complying with California payroll laws, including whether or not the business is paying its employees “under the table.”
NOTE: An employee’s reported compensation directly affects the employee’s unemployment and disability insurance. If an employer is paying an employee “under the table” without reporting the employee’s income, the employee may lose out on important benefits that he or she is entitled to such as unemployment and disability insurance.
- Enforcement: In 1993, the Joint Enforcement Strike Force (JESF) was created to investigate improper payroll, licensing, labor, or tax practices of employers in California. The EDD is a part of this special task force, as well as the Department of Consumer Affairs, the Department of Industrial Relations, the Office of Criminal Justice Planning, the Franchise Tax Board, the Board of Equalization, the Department of Insurance, and the Department of Justice. This task force has the power to investigate any business if it has a “reasonable belief” that the business is not complying with state law. Agents of this task force can interview the owners of the business as well as other employees. If, after conducting an investigation, the JESF determines the employer is non-compliant with licensing, labor or payroll tax law, the EDD will conduct a complete audit of that business. Once the audit is completed, civil or criminal penalties may be issued if it is discovered that the business violated state law.
California State Board of Equalization (BOE)
The Board of Equalization is responsible for reviewing, equalizing, or adjusting property tax assessments, assessing taxes on insurers, and assessing/collecting excise taxes on alcoholic beverages. It also acts as the appellate body for corporate franchise and personal income tax appeals. The Board of Equalization is an elective body created by the California Constitution, and consists of five members, four of whom are elected from areas of the state known as “equalization districts,” and the fifth being the State Controller, who is elected at large. On June 27, 2017, Governor Jerry Brown signed into law legislation stripping the Board of its powers. The legislation created two new departments controlled by the governor responsible for the Board’s statutory duties, the California Department of Tax Fee Administration and the California Office of Tax Appeals.
The BOE no longer collects and administers sales and use taxes, business and special taxes. Additionally, the BOE no longer hears tax appeals for these taxes or income/franchise taxes. The BOE still has its constitutional powers to review property tax assessments, insurer tax assessment, alcohol excise tax, and pipeline taxes.
Federal Government Agencies
Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)
ATF is the law enforcement agency with the Department of Justice tasked with regulating alcohol, tobacco, firearms, and explosives in the United States. This includes collecting taxes on the sale of such items, and investigating the use of these items. ATF’s other responsibilities include suppressing the illicit manufacture and sale of non-tax-paid distilled spirits; controlling interstate trafficking in contraband cigarettes; and policing commercial bribery, fraud, deception, and other improper trade practices in the alcoholic beverage industry. The Bureau also ensures that all revenue due under the alcohol and tobacco statutes is collected.
- Laws enforced/administered: All laws regulating alcohol, tobacco, guns, firearms, and explosives. This includes the Federal Alcohol Administration Act, Gun Control Act, and National Firearms Act.
- Relevant Jurisdiction/coverage: Alcoholic beverage wholesalers and manufacturers; tobacco wholesalers and manufacturers.
- Inspection rights: According to the U.S. Code of Federal Regulations, absent certain exceptions, ATF inspectors are allowed to make unannounced visits to tobacco and alcoholic beverage manufacturers, wholesalers, and retailers during those operations’ business hours. Though inspections of alcoholic beverage retail establishments are rare, ATF does have the right to verify inventory to ensure that revenue due under alcohol statutes is collected.
- Enforcement: ATF can impose fines and prompt the filing of criminal charges for violations of any laws regarding exporting, importing, selling, or distributing alcohol and tobacco.
U.S. Department of Labor (DOL)
The DOL is a large federal government agency. It enforces over 180 federal laws through its twenty-five (25) agencies. These numerous agencies include the Bureau of Labor Statistics, a commissioner-headed division that collects, collates, reports, and publishes labor statistics and statistical studies; the Bureau of Labor Standards, a seven-branch subdivision that develops and enforces standards pertaining to industrial safety, child labor and youth employment, and employment of the disabled; and OSHA, which protects the health and safety of employees in the workforce. These various agencies are granted power to properly investigate the labor issues each agency is charged with governing. Such powers include, but are not limited to, random investigations of businesses to make sure the business is complying with federal labor laws.
- Some of the laws enforced/administered: Fair Labor Standards Act (“FLSA”), Occupational Safety and Health Act (“OSHA”), ERISA, COBRA, Family Medical Leave Act (“FMLA”).
- Jurisdiction/coverage: Due to the numerous laws and regulations that the DOL enforces, it has wide jurisdiction and power to regulate all different types of employers. Each law or act grants the DOL with the scope of its jurisdiction. For example, the FLSA governs businesses that engage in interstate commerce or that annually gross $500,000. Comparatively, the FMLA applies to employers who engage in commerce and have fifty or more employees working each day during at least twenty weeks during the calendar year. Therefore, the specific law that the DOL enforces determines the scope of the DOL’s jurisdiction with respect to that certain law.
NOTE: The DOL’s “Employment Law Guide” is available online at http://www.dol.gov. This guide summarizes each of the different laws the DOL enforces, and states what businesses or organizations each law governs. For more information regarding which specific laws and acts enforced by the DOL apply to your restaurant, CRA suggests that you review this guide.
- Inspection rights: Each separate act that the DOL enforces provides it with different investigative rights. For example, OSHA allows either scheduled or non-scheduled investigations to be conducted, whereas the FLSA simply allows employees the right to file a complaint against an employer. In order to determine what types of investigations you or your business may be subject to, CRA suggests that you review the DOL’s “Employment Law Guide” which is available online at the DOL’s website listed above.
- Enforcement: Each act or law the DOL enforces provides separate and different penalties and sanctions for violation of that specific law or act. These penalties range in severity. Some laws only provide civil penalties, while other laws can subject an employer to criminal charges. The CRA advises each employer to review the DOL’s “Employment Law Guide” listed above in order to determine which civil or criminal penalties it can be liable for.
Equal Employment Opportunity Commission: (“EEOC”)
The EEOC was established by Title VII of the Civil Rights Act of 1964. It is similar to California’s DFEH in that it enforces and interprets anti-discrimination laws in the work place. Its scope includes both private employment and federal government employment as well. The EEOC also provides funding and support to local Fair Employment Practice Agencies.
- Laws enforced/administered: Title VII of the Civil rights Act of 1964; Civil Rights Act of 1991; Age Discrimination in Employment Act of 1967; Older Workers Benefit Protection Act of 1990; Equal Pay Act of 1963; Rehabilitation Act of 1973; Vietnam Era Veterans Readjustment Assistance Act of 1974; and Title I and Title V of the Americans with Disabilities Act of 1990.
- Jurisdiction/coverage: The jurisdiction of the EEOC varies with the specific law it is trying to enforce. For example, the Americans with Disabilities Act governs employers with twenty (20) or more employees, whereas Title VII of the Civil Rights Act of 1964 governs employers with fifteen (15) or more employees. In order to determine which laws specifically apply to your business, CRA advises you to visit the EEOC’s website at http://www.eeoc.gov.
- Inspection rights: Once a charge is filed against an employer, the EEOC will usually request the employer to make a statement regarding the allegations charged. Additionally, the EEOC will request the employer to provide documents and other information regarding the employee and the employee’s claims. The EEOC may even request to visit the worksite at a mutually convenient time and date for the employer, or interview the employer’s employees. If the employer refuses to comply with any of the EEOC’s requests, the EEOC is empowered with the right to subpoena information.
- Enforcement/Penalties: If the EEOC determines that there has been a violation of one of the laws it enforces, it can pursue a lawsuit against the employer in federal court. The EEOC can also issue a Right to Sue Letter to the employee enabling the employee to pursue a lawsuit against the employer.
National Labor Relations Board (NLRB)
The NLRB is an independent federal agency. Its main purpose is to enforce the National Labor Relations Act, which governs relations between unions and employers in the private sector. The NLRB focuses on providing employees with the right to determine if they want to be represented by a union and which one, as well as regulates unfair labor practices in the private sector.
- Laws enforced/administered: National Labor Relations Act.
- Jurisdiction: Private sector employees and employers.
- Inspection Rights: Once a charge is filed, the NLRB will investigate the charge to see if it has any merit. This investigation includes retrieving documents and information from the party making the charge and interviewing persons or representatives of the parties who have pertinent information.
- Enforcement: If the NLRB determines that a charge filed by an employee has merit, it can issue a complaint against the employer. The case is usually heard before an administrative law judge. Civil remedies are available.
U.S. Food and Drug Administration (FDA) Department of Health and Human Services
FDA’s influence over the foodservice industry is restricted to those who mass- manufacture products such as signature items. The mission of this federal agency is to enforce laws enacted by the U.S. Congress and promulgate FDA regulations that protect consumers’ health, safety, and pocketbooks.
Laws enforced by the FDA include the Federal Food, Drug, and Cosmetic Act and the Fair Packaging and Labeling Act. Together, these laws are intended to assure that foods are pure and wholesome, safe to eat, and produced under sanitary conditions; that all packaging is truthful, informative, and not deceptive; and that the contents and placement of information required on packages meet regulations.
- Laws enforced/administered: The main law that the FDA enforces is the Federal Food, Drug, and Cosmetic Act. In addition to this law, the FDA also enforces over twenty-five other laws/acts including the Fair Packaging and Labeling Act and the Food Quality Protection Act.
- Jurisdiction/coverage: All employers or businesses that mass-manufacture food products for retail.
- Inspection rights: Manufacturers of food products are required to register their establishments with the FDA and must provide the agency with a list of products and their ingredients. FDA inspectors are allowed to inspect a business’s premises with a “Notice of Inspection.” If a business refuses to allow the inspectors to enter, the inspectors may receive a warrant. Upon completion of the inspection, the FDA inspectors are required to provide the most senior employee/manager/owner with a copy of the results of their inspection.
- Enforcement/Penalties: The FDA enforces these various laws through several different means. Depending upon the specific violation, the FDA can require a business to recall a certain item, or can issue a civil penalty against that business. For more serious violations, the FDA can initiate criminal proceedings.
United States Citizenship and Immigration Services (USCIS)
United States Department of Homeland Security USCIS is part of the Department of Homeland Security. USCIS is charged with processing immigrant visa petitions, naturalization petitions, asylum applications, and refugee applications. It also makes adjudicative decisions and manages all other immigration benefits functions. Other responsibilities include administration of immigration services and benefits, adjudicating asylum claims, issuing employment authorization documents (EAD), adjudicating petitions for non-immigrant temporary workers (H-1B, O-1, etc.), granting lawful permanent resident status, and granting United States citizenship.
SCIS enforces the nation’s immigration laws, including the Immigration Reform and Control Act of 1986, the Immigration Act of 1990, and the Illegal Immigration Reform and Immigrant Responsibility Act of 1996.
Employer liability was augmented under the Immigration Reform and Control Act, with the Employment Eligibility Verification (“I-9”) form laying the cornerstone for new responsibilities for U.S. business operators.
- Laws enforced/administered: Immigration Reform and Control Act of 1986, Immigration Act of 1990, Illegal Immigration Reform and Immigrant Responsibility Act of 1996.
- Jurisdiction/coverage: All employers, employees, and residents of the United States.
- Inspection rights: Officials from the Department of Homeland Security may inspect an employer’s Form I-9, Employment Eligibility Verification. Employers will generally receive a written Notice of Inspection at least 3 days before the inspection. These officials can inform the owner, designee, senior management official or registered agent of the business entity of an inspection in person or by certified U.S. mail, return receipt requested. Officials may also use subpoenas and warrants to obtain the forms without providing 3 days’ notice.
- Enforcement/Penalties: As discussed in CRA’s report regarding how to properly complete I-9 forms, USCIS can issue either civil penalties or criminal penalties if an employer continues to allow an illegal alien to work at his or her premises. Please review the CRA Industry Insights regarding I-9 forms for more detail regarding the types of penalties used to enforce immigration laws.
Internal Revenue Service (IRS) U.S. Department of the Treasury
As a unit of the Treasury Department, the IRS is responsible for determining, assessing, and collecting internal revenue taxes and otherwise enforcing the internal revenue laws.
The agency’s structure is complex, consisting of planning, finance, and research departments, criminal investigation divisions, data processing units, and returns processing satellites. FICA and FUTA are some employer tax contributions collected by the IRS.
- Laws enforced/administered: Internal Revenue laws, IRA Restructuring and Reform Act of 1998.
- Jurisdiction/coverage: All employers, employees, and residents of the United States.
- Inspection rights: IRS has been given broad powers in the area of investigation and the issuing of summonses requiring taxpayers to produce records and testimony for examination. The U.S. Supreme Court has set forth, in a series of cases, the rules with which the IRS must comply in order to obtain a court order enforcing a summons. Taxpayers may be imprisoned for failure to comply with a summons.
- There are two types of IRS agents – revenue agents and special agents. A revenue agent is a person who conducts routine civil audits; a special agent is a person who conducts only criminal investigations for the IRS. Keep in mind that information obtained by a revenue agent can also be used against you in criminal proceedings.
- Enforcement: The IRS can issue penalties such as late charges against a person or entity for failure to timely file a tax return or pay the taxes owed. Additionally, if the IRS discovers that a person or business has lied on their tax return, the IRS can file criminal charges against that person or business.
What to Do if You are Inspected
At a time when government agencies have increased involvement in business operations, it becomes imperative that restaurant operators develop proper procedures for contacts with the many government agencies, inspectors, and representatives who may visit their establishment.
It is in your own best interest to courteously welcome these individuals and make available to them whatever it is they have a right to inspect. Naturally, you are entitled to request identification before opening books or submitting to an inspection of any kind. If you consider it advisable, consult with your accountant and your attorney before doing so. Properly authorized auditors and inspectors shouldn’t mind being asked to identify themselves or agreeing to an audit at a more convenient time or after you have consulted with your accountant or attorney.
In addition, employees should be instructed to refer all inquiries to management, whether formal or casual and whether by telephone or personal visit. Because of the wide range of possible subjects that may be reviewed in any government audit or inspection and because individual employees may be misinformed or unaware of the subject of such visits, they should be instructed to refrain from discussion unless and until authorized by management. Procedures should also be established advising unit managers of their authority and responsibilities relative to any contacts with government representatives.