Stop breaking the law to fill your shifts.
Every worker on Armada is a W-2 employee of Armada — not your 1099, not your liability. We are the Employer of Record on every shift.
The exposure, by the numbers
Source: U.S. Department of Labor
- 2025 restaurant misclassification fines$65.7M
- Year-over-year increase+89%
- Projected 2026 DOL fines (restaurants)$80–100M+
- Average penalty per misclassified worker$17K – $40K
- States now using the ABC test33
The crisis happening right now
Restaurants are being fined millions for filling shifts off the books.
A single unemployment filing from one off-the-books worker can trigger a 3-year DOL audit across the entire workforce — the cascade that drove a record $65.7M in enforcement against restaurants in 2025 alone.
$65.7M
Fined to restaurants in 2025 for worker misclassification — up 89% from 2024.
$17–40K
Average penalty per misclassified worker, with a 3-year lookback (varies by state).
$80–100M+
Projected 2026 DOL restaurant misclassification fines.
33 states
Now treat the old way of filling shifts off the books as a six-figure liability.
And the incentive to report just changed
The No Tax on Tips Act gave 10 million tipped workers $25,000 in personal reasons to report their employer.
Tipped workers can now claim up to $25,000 in tax savings on reported tips — but only if their employer reports their wages. Off-the-books shifts don't qualify, and that's driving the surge in filings and audits.
Why 1099 doesn't work for restaurants
The ABC test — and why Prong B is fatal for restaurants.
Used by 33 states and the U.S. Department of Labor, the ABC test presumes every worker is an employee. To classify someone as 1099, the hiring entity must prove all three of the following.
Control
The worker is free from the control and direction of the hiring entity in performing the work.
Business
The worker performs work that is outside the usual course of the hiring entity's business.
Fatal for restaurants
Independence
The worker is customarily engaged in an independently established trade or business.
Why Prong B is fatal
A server serving food at a restaurant is performing the restaurant's core business function. A bartender making drinks is the business. Workers performing your primary business activity cannot satisfy Prong B — which is what makes 1099 classification legally indefensible for restaurant roles.
How Armada removes the risk
Make the classification question disappear.
W-2 Employer of Record
Armada is the legal employer of every worker on your bench. There is no classification question for you to answer.
You don't carry the 1099 exposure
The misclassification risk that gig platforms push onto restaurants sits with us instead. Workers are ours.
Same-night pay, on us
Workers are paid the same night they finish a shift — funded by Armada, not advanced by a third-party lender or pulled from your float.
Audit-ready paperwork on our side
I-9s, W-4s, payroll records, workers' comp certificates, and quarterly filings are all generated, stored, and produced on request — so a DOL audit lands on our desk, not yours.
Free download
How exposed is your restaurant?
Ten questions, a scoring rubric, and a quick-reference card on the ABC test. Find out where your classification practices sit on a scale from Low to Critical — built from the same enforcement data driving the 2025 spike.
- 10-question self-assessment
- Scoring rubric: Low → Critical
- ABC test quick reference
- Built from current enforcement data
For informational purposes only. Not legal advice — consult an employment attorney for guidance specific to your situation.
FAQ
What operators ask first
How does Armada eliminate 1099 misclassification risk?+
Armada operates as the Employer of Record. Every worker on your bench is a W-2 employee of Armada — not a 1099 contractor of your restaurant. There is no classification question for you to answer because the employment relationship is with us.
What is the ABC test, and why does it matter for restaurants?+
The ABC test is used by 33 states (including CA, CO, IL, MA, NJ) and the U.S. Department of Labor. It presumes every worker is an employee unless the hiring entity proves all three prongs. Prong B — that the work is outside the hiring entity's usual course of business — is effectively impossible for restaurants: a server serving food, or a bartender making drinks, is performing the restaurant's core business.
What's actually happening with enforcement right now?+
Restaurants were fined $65.7M in 2025 for worker misclassification, up 89% from 2024. The Department of Labor is projected to issue $80–100M+ in restaurant misclassification fines in 2026. A single unemployment filing from one misclassified worker can trigger a 3-year DOL audit across the entire workforce.
What does a single misclassified worker actually cost?+
Average penalties land between $17K and $40K per misclassified worker, with a 3-year lookback (the exact amount varies by state). Recent examples: Colorado settled with Instawork for $400K; Denver's auditor is pursuing $1M+ in ongoing enforcement; the Ritz-Carlton was cited $2M for classification violations.
Why did the No Tax on Tips Act change the math?+
It gave roughly 10 million tipped workers up to $25,000 in personal tax savings — but only if their employer reports their wages. That created a direct financial incentive for off-the-books workers to come forward, which is what's driving the surge in filings and audits.
What if my counsel wants to review the structure?+
We welcome legal review. We'll share our standard Master Services Agreement and the EOR structure on request so your counsel can evaluate it before you onboard.