Food Servers

The Fair Labor Standards Act (FLSA) guarantees certain protections for employees’ rights concerning minimum wage and overtime breaches. The FLSA’s protections contain very limited exceptions.

Recently, a church was caught red-handed in attempting to evade the FLSA’s requirements in Cathedral Buffet Opinion. The Defendant, a church, operated a buffet style restaurant for church goers that was operated by unpaid “volunteers.” The U.S. Department of Labor prosecuted claims against the church for violations of the FLSA and recovered nearly $388,507 in back pay for the workers. The DOL’s victory illustrates that even if your employer is a religious organization, and even if you assumed you were a volunteer, that you may still have an entitlement to wages.

The business in question in this case was Cathedral Buffet, Inc., which was operated by Grace Cathedral, a mega-church located near Cleveland Ohio. The restaurant in dispute (Cathedral Buffet) was staffed by two separate groups of workers. One group of workers was classified as volunteers, who weren’t paid anything, let alone minimum wage, for the work they performed at the restaurant. However, the second group of workers were paid at or above the minimum wage. The volunteer group performed essentially identical roles as the group of workers who were paid by the Grace Cathedral. Notably, the church’s minister was responsible for recruitment of the unpaid positions held.

The FLSA mandates that employees be paid at least the federal minimum wage, which is currently $7.25 per hour. The DOL assists private attorneys in the enforcement of this federal law. As Cathedral Buffet found out, the consequences for violating the federal law are severe.

The FLSA is a remedial statute, and its protections for employees are interpreted in the broadest possible sense. When a business classifies a worker as a “volunteer”, and even if the specific worker considers themselves to be undertaking a voluntary role, these factors still do not necessarily enable the business to neglect or avoid compliance with the federal minimum wage and overtime obligations. The FLSA’s reach is wide and applies to all businesses, regardless of whether the business in question is a secular or religious organization.

In response to the Defendant’s argument that the individuals operating the restaurant were volunteers, the DOL argued that the “Defendant’s argument would effectively allow employers such as themselves to evade the FLSA’s requirements by forcing people to work without pay, thereby necessarily precluding such workers from expecting compensation or becoming economically dependent in the first place by virtue of such coercion.”

In finding that the workers were employees that were entitled to the protections of the FLSA, the Federal District Court in Ohio held that the workers were also entitled to liquidated (double) damages because the employer did not meet their burden of proof to establish that the violation of the FLSA was done in good faith. As a result, the Court entered a judgment in favour of the employees for $388,507.

Cathedral Buffet Appeals the Decision to the 6^th Circuit

Since the ruling, Cathedral Buffet has appealed the decision to the 6^th Circuit Court of Appeals. The church argues that although the business was operated as a commercial venture, the actual business itself did not achieve any profitable results. Moreover, the restaurant had a charitable purpose. The church further argues that they failed to profit from the activities in question and they were supported and subsidized by a tax-exempt church.

Non-profit organizations and other churches that permit “volunteers” to perform tasks for their organization will pay close attention to the 6^th Circuit’s decision on this case.

The case discussed in this article was pending in the United States District Court for the Northern District of Ohio, Eastern Division, with Case No. 5:15-CV-1577.  Full text of the opinion can be found here.

Employees are Protected by FLSA Regardless of Immigration Status

On September 19, 2017, the United States District Court for the Western Division of Kentucky ruled that employees, regardless of their immigration status, are protected by the Fair Labor Standards Act (FLSA). The Court held that an employer could not obtain the Plaintiffs’ social security number, tax identification number, or the identity and contact information of Plaintiffs’ relatives when the Plaintiffs’ sought to bring an action against the employer for violating the FLSA.

Defendants Own Kentucky Restaurants

The Plaintiffs to the action are two former restaurant servers of Defendants who own and operate a number of Louisville, Kentucky restaurants.  Plaintiffs have asserted that Defendants failed to pay them the statutory minimum and overtime wages at all times throughout their employment.

The Plaintiffs’ attorney, Trent Taylor, explained that “the court’s ruling is a big victory, not just for the Plaintiffs, but all similarly situated employees. This victory reaffirms the right of all workers, regardless of their status, to receive compensation for the work they’ve performed. More importantly, it strips unscrupulous employers of a means of intimidating both current and prospective FLSA plaintiffs from asserting their rights under the statute.”

Intimidating Techniques Used to Reveal Immigration Status

After the Defendants utilized intimidating techniques designed to reveal the immigration status of the Plaintiffs and their relatives, the Court determined that the requested information was not relevant to any claims or defenses raised. The Court explained that “[p]ermitting inquiry into information that may influence immigration status, such as social security numbers, presents a danger of intimidation that can inhibit plaintiffs in pursuing their rights.” It also noted that, “even where information concerning a plaintiff’s immigration status may arguably be relevant, courts generally find the potential for prejudice far outweighs whatever minimal probative value such information would have.” The Court’s decision affords FLSA plaintiffs greater assurance that defendant-employers who utilize similar discovery tactics will be prevented from doing so, and could, in certain circumstances, face sanctions for such conduct.

Read the full opinion here.

Case: Suarez et al.v. Rosa Mexicano Brands  Inc.et.al; case number 1:16-cv-05464, in U.S District Court for Southern District of New York.

Multiple former employees of Rosa Mexicano have requested that the New York federal court approve a $3.6 Million settlement agreement in their nationwide class action proposal. The class action group against Rosa Mexicano accused the affluent Mexican chain restaurant of neglecting to pay appropriate amounts on both minimum wages and overtime rates.

Six former employees of Rosa Mexicano sought preliminary approval from the courts and conditional certification of the class action, stated that the presented FLSA settlement provides resolution of all similar State Law and federal Fair Labor Standards Acts (FLSA) claims made in the collective and class action against Rosa Mexicano Brands Inc and related affiliates.

According to the supporting memorandum written on behalf of the former employees by their legal counsel, the settlement is reasonable, fair and accurate under nine factors set forth in the 1974 Second Ruling in Detroit v. Grinnell Corp. Inclusive factors of the case include litigation expenses, the complexity of the case, liability establishing risk, maintenance of class action and estimating damages.

Representing close to forty percent of the class members alleged damages, the $3.6 million figure represents a significant percentage of recovery that the plaintiffs are entitled to, should they have prevailed on all claims lodged and survived the appeals process.

Class members in New York will be awarded $1.19 million – the majority of the settlement fund and the remaining $1.11 million will be well received by members in other states or separate FLSA class. One-third of the settlement will be recovered by the representing legal counsel to recover litigation expenses and attorney fees.

Former service employees from Rosa Mexicano had sued in July 2016 and claimed that the upmarket chain had failed to pay minimum wages and overtime, and by doing so violated federal and state labor laws.

The service employees included bussers, food runners and servers at several Rosa Mexicano branches in Massachusetts, New York, and other various locations and alleged that the chain was illegally opting to reduce labor costs by paying service employees at a tipped minimum wage rate.  Rosa Mexicano chain in 12 out of 14 U.S. locations paid employees at the tipped minimum wage rate despite failing to meet legal labor requirements under the FLSA, Massachusetts and New York Labor Code wage and hour laws.

Former workers alleged that the chain failed to notify them of tip credit provisions, did not take into consideration automatic gratuity when calculating overtime pay, and forced employees to share tips with other non-service employees who were not eligible for tips.  The latter is commonly referred to as a tip credit violation.  The worker’s group also claimed the restaurant failed to pay the required overtime rate of time and a half their regular hourly wage for all hours worked over the standard 40-hour working week.

Rosa Mexicano currently has 12 chains in U.S locations from New York City, Washington D.C, Boston, Miami to Georgia. Rosa Mexicano restaurants are also in Puerto Rico and the United Arab Emirates but the lawsuit only specified U.S. locations.

The question of a mandated minimum wage has been the subject of debate for many years.  Since 2009, the federally mandated minimum wage has been locked in at $7.25 per hour.  However, many states and cities have elected to increase the required minimum wage. The consequence of the decision to do so on things like economic growth, earnings, and unemployment has been unclear.

Seattle Increased Minimum Wage to $15 per Hour

On May 1, 2014, it was announced that Seattle would increase their minimum wage to $15 per hour.  Many hourly workers in Seattle celebrated a success in the Fight for $15 campaign.  Since then, the increased minimum wage has been phased in over the past few years and reached $15 per hour in 2017.

University of Washington Study Says it Backfired

However, as some free market advocates predicted would happen, a recent study by the University of Washington suggests that the increased minimum wage rate has backfired in the face of the employees it was meant to benefit.  The advocates against the minimum wage increase warned that employers would hire fewer employees or reduce the number of hours employees were permitted to work if the minimum wage was increased.  The University of Washington’s study supports this argument and concluded that the number of hours worked by affected employees fell by around nine percent.  The study also concluded that affected employees’ net earnings fell by $125 a month on average.

Criticisms of the Study

One of the major criticisms of the University of Washington’s study was that the data it analyzed excluded business with multiple locations.  This is a significant oversight, given the fact that 40% of the employees affected by the minimum wage increase work at large corporate chains like McDonald’s or Best Buy.

University of California-Berkley Study Says it Achieved Goal of Increasing Wages in Food Service Jobs

On the other hand, results from a University of California-Berkley study, which focused exclusively on the food service industry, concluded the Seattle Minimum Wage Ordinance achieved its goal of increasing wages in food service jobs.  The California-Berkeley team, led by Professor Michael Reich, has done extensive research on the minimum wage debate in other cities that maintain some of the highest minimum wage rates in the country, including San Francisco, Chicago, and Oakland.  The studies conducted by Professor Reich’s team over the years have consistently found that increased minimum wages do not lead to job loss or a slowdown in economic growth.  Instead, increased minimum wages benefit both employer and employee.  An employee can benefit from earning higher wages; whereas, an employer will experience workers staying on the job longer, which reduces turnover and training costs.

The debate about surrounding the minimum wage will undoubtedly continue for the foreseeable future, as it has become a highly partisan issue.  The University of Washington study was published as a working paper by the National Bureau of Economic Research, but has not yet faced peer reviewed.  In the months to come, new information is certain to surface that will shed light on the implications of Seattle’s minimum wage policies.