The restaurant industry is notorious for failing to comply with wage and overtime laws. Many restaurant employees are often either paid below the minimum wage and are included as part of the tip pool to supplement the difference, or are paid incorrectly or not at all for any hours worked over forty (40) in a week.
That was certainly the case for one Mexican food restaurant with over 20 locations in the Phoenix area. In May 2016, the Owners of Federico’s Mexican Food Restaurant agreed to a settlement with the U.S. Department of Labor (“DOL”), who brought a lawsuit against the Restaurant alleging that they failed to pay its employees overtime. As part of this settlement, the Owners will pay about $101,000 in overtime back wages, as well as damages, to 48 employees. In total, the restaurant will have to pay about $200,000 for failing to comply with the Fair Labor Standards Act (“FLSA”).
Federal law is very specific about how employers are required to compensate their employees. The FLSA requires employers to (1) maintain payroll and employment records; (2) compensate employees for all hours worked, (3) pay employees at least minimum wage and an overtime rate (time and one-half the regular rate of pay) for hours worked over forty (40) in a work week, and (4) comply with limitations on the hours of work and types of jobs for employees under 18 years old.
However, there are exemptions from overtime pay for employees employed as executive, administrative, professional, computer and outside sales employees. If an employee’s specific job duties and salary meet the requirements of the DOL’s regulations, an employee is not entitled to the overtime pay. Many employees working in the restaurant industry do not fall into any of the exemption categories, and are therefore entitled to time-and- a-half for hours worked over forty (40) in a given week.
The DOL investigation revealed that Federico’s was not complying with several provisions of the FLSA. First, the restaurant was not keeping accurate records of hours worked or wages paid to its employees in violation of the FLSA’s record keeping provisions.
Second, some employees who worked at multiple locations during the same week were not compensated at the proper overtime rate for the hours they worked. For example, some employees would work an average of forty-eight (48) hours per week at several locations across Phoenix, but the Restaurant would fail to combine the hours worked at the multiple locations and not pay any overtime to the employees. If the Restaurant did pay for hours worked over forty (40), it would pay its employees its straight hourly rate (instead of the time-and- a-half premium) and would often pay the overtime in cash and off the books. Moving forward, the Restaurant will require its employees to clock in and out and will pay them their proper overtime rate.
All employees should be compensated for the hours they work in a given work week. Thanks to the Department of Labor, forty-eight (48) employees will be properly compensated for the work they have performed.