Our Award Winning New York Wage and Hour Attorney has talked extensively on requirements and violations of the Fair Labor Standards Act (“FLSA”) and has been asked to comment on a recent case that was investigated by the U.S. Department of Labor (“DOL”). Here’s a tip: Don’t steal from your employees. Sounds simple doesn’t it.
PEREZ v. SOPHIA’S KALAMAZOO, LLC
Based on press reports, an investigation was conducted by the DOL and it was discovered that the restaurant was requiring its wait staff to pay it, the employer, in order to continue to working. The investigation also reportedly revealed that the employer took retaliatory action against an employee that brought the issue to the attention of the DOL.
The FLSA establishes, among other things, minimum wage, overtime pay, and record-keeping standards affecting employees in federal, state, and local governments as well as in the private sector.
Under the FLSA, when customers tip employees, restaurant operators can benefit by claiming a credit toward their obligation to pay those employees the full minimum wage. An employer that claims this tip credit is required to pay a tipped employee only $2.13 per hour in direct wages. If an employee’s tips, when added to the wages paid directly by the employer, do not equal at least the federal minimum wage of $7.25 per hour the employer must make up the difference. Tips, however, are the property of the employee who receives them.
The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular hourly rates for hours worked beyond 40 per week. Additionally, the law requires employers to maintain accurate time and payroll records and prohibits retaliation against employees who exercise their rights under the law.
Findings of the DOL Investigation
The DOL’s investigation, however, found that the restaurant’s owners and their managers failed to comply with the FLSA’s requirements for tipped employees, as well as the minimum wage, overtime, record keeping and anti-retaliation provisions, specifically by:
1. Requiring servers to pay the employer $2 per hour from their tips, without a tip pooling arrangement in place;
2. Failing to pay servers for time spent working before and after their scheduled shifts;
3. Taking deductions from employees’ pay for uniforms or incorrect orders, causing their hourly rates to fall below minimum wage;
4. Failing to accurately record daily and weekly work hours and earnings;
5. Paying kitchen staff flat salaries without regard to the number of hours they worked, resulting in violations of the overtime regulations when these employees worked over 40 hours in a workweek and were not paid overtime; and
6. Discriminating against a worker whom the employers blamed for calling the Department of Labor to complain about the restaurant’s pay practices.
Results of the Investigation
The federal judge hearing the case has ordered the restaurants and their owners to pay $245,000 in back wages and liquidated damages to the 118 employees and workers affected by the practices.
Additionally, the court has also enjoined the employer from violating the FLSA in the future and has required that the employer make significant changes in their business practices including:
TRAINING REQUIRED: Providing required training to managers and employees on the FLSA’s tip credit provisions to ensure compliance with the FLSA at all of its locations;
CREATING RECORD KEEPING SYSTEMS: Installing a computer or point-of-service system that records hours worked and permits servers to self-report tips received;
TRACKING HOURS WORKED: Providing every current and future employee with a “Work Hours Record Keeper” publication they can use to track their hours;
COMPLIANT WAGE STATEMENTS: Providing a complete wage statement to each employee each pay period, showing all hours worked, rate of pay, gross pay received, the nature and amount of all deductions, net pay, the pay period covered by the payment, and a copy of the employee’s record of hours worked.
If you have any questions about your obligations under federal or New York State labor laws or have received a notice from the Department of Labor, contact our office for a confidential consultation. Proactive steps can be critical in these cases as the exposure for damages can increase quickly. It is important to develop workplace policies and practices that in compliance with the applicable labor law.
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