The U.S. Department of Labor Wage and Hour Division (DOL) recently investigated Roanoke area restaurants for violations of the federal Fair Labor Standards Act (FLSA). As a result of the investigation, a Virginia federal court has ordered the six restaurants and their owners to pay a total of $3 million in back wages and liquidated damages to 149 employees.
Specifically, the DOL determined that the restaurant-defendants willfully violated the FLSA’s minimum wage and overtime provisions by compensating servers only through tips, rather than paying the federal minimum wage and overtime for working over 40 hours per workweek. The investigation also revealed that the restaurants’ kitchen staff, including dishwashers, cooks, and assistant cooks, were paid “straight time” instead of overtime at a rate of 1.5 times their regular rates for the hours they worked over 40 in a workweek. Additionally, the restaurants failed to comply with the FLSA’s recordkeeping requirements.
Wage and hour issues surrounding pay and tips come up frequently in the food service industry. Some of the most common violations include:
- Illegal Tip Pools: Employers may require tipped employees to contribute tips to a general pool to be shared with non-tipped employees. A valid tip pool may not include employees who do not “customarily and regularly” receive tips. Nor will the tip pool be valid if management employees are participants. Employers must notify employees of any required tip pooling arrangements.
- Dual jobs: When employees spend a substantial amount of time (more than 20 percent) performing general preparation work, employers may not take a tip credit for the time spent on those duties. This means that a tipped employee may be entitled to the full minimum wage rather than the reduced tipped credit rate if a significant amount of time was spent performing duties unrelated to the tipped occupation, such as bathroom cleaning or food preparation.
- Credit Cards: Employers may deduct a percentage from employees’ tips to pay charges imposed by credit card companies when a customer’s tip is charged to a credit card. However, this deduction cannot reduce employees’ wages below the minimum wage. Employers many not deduct charges for phone lines or other administrative costs from the employees’ tips.
- Overtime violations: Non-exempt employees are entitled to receive overtime pay at one and one-half times their regular rate for all hours worked over 40 in a workweek. Employers can violate this provision by paying employees “straight time” wages for overtime hours, or by failing to include all components of the tipped employee’s wages when calculating the regular rate.
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