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February 5, 2024
Last month, the U.S. Department of Labor’s Wage and Hour Division (DOL) announced that a restaurant in California[1] will pay $824,405 in back wages and liquidated damages to 102 workers after an investigation revealed that the restaurant denied overtime pay to workers for the hours they worked beyond 40 per week, as the Fair Labor Standards Act (FLSA) requires. The restaurant also failed to maintain accurate and complete payroll records. The DOL assessed another $50,320 in civil penalties against the restaurant due to the willful nature of its violations.
The DOL investigators found that the restaurant created different corporations and did not combine the hours that workers worked at multiple locations in an effort to avoid paying them overtime. Some restaurant workers who worked up to 26 overtime hours per week received their regular rate of pay for those hours; however, pursuant to the FLSA, the restaurant should have paid those hours at a rate of time and one half.
Employers: You cannot simply move workers between establishments or locations in the same workweek to avoid paying overtime. If you are a restaurant (or other employer) that takes a tip credit,[2] you must calculate overtime based on the full minimum wage (currently $7.25 per hour at the federal level).[3]
The author of this article, Patricia Tsipras, is a member of the Bar of Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in California, Pennsylvania, or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
[1] The restaurant operated under different corporations as La Estrella Tacos & Seafood at four locations in Manteca, California.
[2] Under the FLSA, a tipped employee is a worker engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips. The FLSA permits an employer to take a tip credit toward its minimum wage and overtime obligations. An employer that claims a tip credit must ensure that the worker receives enough tips from customers and direct wages per workweek to equal at least the minimum wage and overtime compensation required under the FLSA. If a worker’s tips combined with the employer’s direct wages do not equal the minimum hourly wage in each workweek, the employer must make up the difference.
[3] When state law differs from the federal FLSA, an employer must comply with the standard most protective to employees. For example, some states require a higher minimum wage or may prohibit tip credits.
