The New York City Bar Association will hold the CLE program “Opening A Restaurant in New York: Legal Issue Boot Camp” on March 24. The program will focus on the corporate, real estate, liquor license, and labor/employment issues involved in opening a restaurant in New York City. Speakers on the panel include Jack Gordon, partner at Kent, Beatty & Gordon LLP; Carolyn Richmond, partner at Fox Rothschild LLP; Sonal Shah, General Counsel of Ark Restaurant Group; Alex Victor, partner at Davidoff, Hutcher & Citron LLP; and Larry A. Welch, Associate at Golenbock Eiseman Assor Bell & Peskoe LLP. Lou Pechman will be chairing the event. For more information on the program please visit the event page.
United States Department of Labor
Better ingredients, better pizza, but worse pay. Papa Johns forks over $500,000 for wage theft violations.
Attorney General Eric T. Schneiderman and the U.S. Department of Labor recently announced four settlements totaling nearly $500,000 with three current Papa John’s Pizza franchisees and one former franchisee, who together owned a total of nine restaurants in Queens, The Bronx, and Brooklyn. The franchisees investigated by the Attorney General and the U.S. Department of Labor’s Wage and Hour Division admitted to a number of labor violations, including minimum wage, overtime and other basic labor law protections. The employees underpaid by franchises announced in the settlements worked in several neighborhoods across Queens, as well as in neighborhoods in Brooklyn and The Bronx.
“These settlements and our successful partnership with the Attorney General’s office are a warning to employers who choose to violate state and federal wage laws that we do not tolerate such mistreatment of employees and will actively work together to pursue and obtain proper compensation for workers,” said Jeffrey S. Rogoff, the regional solicitor for the U.S. Department of Labor. Back wages and damages will be distributed to over 250 underpaid workers.
The agreements followed joint investigations into the franchisees, covering various time periods beginning as early as 2008. All investigated franchisees admitted to the violations of law outlined in the settlement agreements. The admitted violations included the following:
• Some stores failed to pay employees the minimum wage and overtime wages required under the federal Fair Labor Standards Act and state law.
• Some stores violated a state requirement that employers must pay an additional hour at minimum wage when employees’ daily shifts are longer than 10 hours.
• Some stores failed to provide adequate uniforms for employees for the number of shifts in a week, and also failed to pay the required uniform laundry allowance.
In addition to payment of $469,355 in back wages and liquidated damages, the franchisees which remain open must also institute complaint procedures, post a statement of employees’ rights, and designate an officer to submit quarterly reports to the Attorney General’s Office regarding ongoing compliance for three years, and one franchisee must also retain an independent monitor going forward.
Today is National Waiters and Waitresses Day. To commemorate, check out this blog about the top ten wage violations in the restaurant industry written by waiterpay.com founder Louis Pechman, featured on the Huffington Post.
In handling over 100 restaurant pay lawsuits, I have seen common themes play out, whether that restaurant is a mom and pop take out place or a high end fine dining establishment. From the perspective of someone who has collected millions of dollars for restaurant workers across the United States, here are my top five tips to avoid wage theft lawsuits.
1. Tips Are the Property of Servers
From the management point of view, think of tips as kryptonite – stay away. It is not your money. Many of the lawsuits against restaurants arise from management dipping into gratuities left by customers for their servers. Tips are not house money. Owners need to make sure that tips are only shared with waiters, waitresses, bussers, runners, and other front of the house workers who deal with customers. And, managers need to stay out of the tip pool as well. The temptation to dip into the tips of servers – some of whom may be making a six-figure income – often times is irresistible for an owner. Taking 5% off of the pool, sharing tips with the kitchen, putting a manager in the tip pool, and having servers kick in cash every shift for a dishwasher to scrape plates, are all examples of skimming of tips that have resulted in lawsuits. Keep in mind that the penalties for skimming tips are severe, as the restaurant may have to disgorge the tips, lose the tip credit, and be subject to liquidated damages.
2. Paying Salary or Shift Pay = Lawsuits
Unfortunately, there is a common misconception that if you pay an employee on a salary, you don’t have to pay overtime. This can be a catastrophic mistake. The fact is that only a limited amount of employees in restaurants are “exempt” from the requirement of overtime under the federal Fair Labor Standards Act (FLSA) and the New York Labor Law. In order to qualify as an “exempt” job under these laws, a restaurant worker has to fit within the administrative, executive, or professional exemption. So, if you are paying your cook, maître’d, bookkeeper, host or other non-management employee a salary for a workweek in excess of 40 hours, you are unlawfully failing to pay them overtime — regardless of how much they are paid. Likewise, regardless of how much you pay an employee for shift pay, if that employee works more than 40 hours per week, the restaurant has broken the law by not paying him or her time and one-half for all hours worked over forty.
3. Keep Track of Work Hours
Restaurant pay lawsuits usually involve some sharply contested claim that employees are not paid for all hours worked. Do the kitchen workers take a break between lunch and dinner rush? Do waiters clean up for a half hour after they close out of the POS system? What is the start time, stop time, break time, lunch time? If a restaurant is not keeping track of hours worked by employees in either the front of the house or the back of the house, then it risks claims for unpaid hours. Both the FLSA and the New York Labor Law require employers to keep time and pay records of their employees. In this regard, it is important to note that in the Mt. Clemens case the Supreme Court held that where the employer keeps inadequate records, there is a presumption that the employee’s recollection of hours worked should be believed.
4. Know Your Restaurant Pay Math
Many restaurants get caught up in “gotcha” violations because they do not keep track of the specific wage rates for their workers. Here is a checklist for current restaurant pay requirements in New York
o Minimum Wage for non-tipped employees, including back of the house, is $8.75 per hour and $13.13 per hour for overtime hours.
o Tipped Minimum Wage for front of the house is $5.00 per hour and the tip credit is $3.75. The overtime rate for front of the house is $9.38 per hour. (You can only take the tip credit once).
o Tipped Minimum Wage for delivery workers is $5.65 and the tip credit is $3.10. The overtime rate for delivery workers making tipped minimum wage is $10.03 per hour.
o Uniform Maintenance for workers that work over 30 hours a week is $10.90; 20 -30 hours a week is $8.60; and less than 20 hours a week is $5.20.
o Meal Credits for front of the house and delivery workers is $2.50 and for back of the house workers is $3.00.
o Restaurants may deduct the cost of converting a tip left on a credit card to cash, but only may deduct the pro-rated share of the charge levied by the credit card company.
o All restaurant employees that work a spread of hours that exceed 10 hours on any day must receive an additional $8.75 in spread of hours pay.
5. Respect, Respect, Respect
A large portion of workers who sue their boss for wage pay violations visit an attorney because they believe they were the victims of an unlawful termination or wrongful discharge. Although that claim is generally DOA because employees in New York are “at will,” the inquiry leads to the follow-up question of “But how were you paid?” If that worker was paid incorrectly, and the employee believes he has been mistreated, a lawsuit will follow. However, there are many occasions where employees with excellent claims for back pay do not want to sue because the owner always treated them with respect and they believe they were paid fairly, albeit incorrectly. On the other hand we have seen lawsuits where some of the highest paid servers in New York have sued because they were treated disrespectfully, called names, and talked to in a demeaning manner. Restaurant owners in New York are right to believe they are under siege, but it is a misconception that every employee has a goal to bring a public lawsuit. Sometimes, treating employees with respect can make the difference in whether your cook or waiter has the word “plaintiff” before his name.
*These comments were prepared for the New York City Hospitality Alliance program on February 2, 2015, Have We Reached the Tipping Point for Tips?
Big Texan Steak Ranch has agreed to pay $650,000 in minimum wage back wages and $150,000 in liquidated damages to 279 current and former wait staff following an investigation by the U.S. Department of Labor’s Wage and Hour Division, which found violations of the Fair Labor Standards Act’s minimum wage and record-keeping provisions. Violations stemmed from an illegal tip pooling arrangement by the restaurant, in which management dipped into the tips of the waiters, waitresses, and busboys of the restaurant
According to the DOL’s investigation, Big Texan illegally retained a portion of the restaurant workers’ tips to pay for business costs, such as menus, glassware, trays and contest prizes. The restaurant also made illegal deductions from workers’ paychecks for uniforms and withheld additional percentages of tips as a disciplinary tactic, bringing those workers’ hourly wages below the required federal minimum wage. Additionally, the company failed to maintain accurate time and payroll records.
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 rates of pay for hours worked beyond 40 per week. In accordance with the FLSA, an employer of a tipped employee is required to pay no less than $2.13 an hour in direct wages, provided that amount plus the tips received equals at least the federal minimum wage of $7.25 an hour. If an employee’s tips combined with the employer’s direct wages do not equal the minimum wage, the employer must make up the difference. Employers are required to provide employees notice of the FLSA tip credit provisions, and to maintain accurate time and payroll records.
Two Xaga Sushi restaurants located in Merrick and Hewlett, Long Island will pay $261,887 in back wages and liquidated damages to 70 low-wage workers as part of a consent judgment obtained in federal court by the U.S. Department of Labor, along with $26,322 in civil money penalties.
An investigation by the U.S. Department of Labor’s Wage and Hour Division found that the two Nassau County restaurants violated the minimum wage, overtime and record-keeping requirements of the Fair Labor Standards Act (FLSA). Specifically, the restaurants paid their employees, who regularly worked from 42 to 50 hours per week, a flat monthly salary with no overtime pay for those hours worked above 40 in a workweek. In addition, the restaurants also operated an illegal tip pool in which tipped employees, such as the front of the house staff, were required to share their tips with kitchen staff. Workers were paid in cash, and adequate payroll records were not kept by the restaurants.
The judgment, which was filed in the U.S. District Court for the Eastern District of New York in Central Islip, was filed by the department’s Regional Office of the Solicitor in New York City. The judgment prohibits the defendants from withholding payment of the back wages and damages, requires them to pay proper minimum wage and overtime to employees, and to maintain adequate and accurate records of wages and work hours.
“These at-risk workers will now receive the wages and tips to which they are entitled under the FLSA,” said Irv Miljoner, the division’s Long Island district director. “Not paying legally required minimum wage and overtime deprives these workers and their families of money for daily living expenses. It also undercuts those employers who choose to obey the law and pay their workers properly.”
The investigations were conducted under the Wage and Hour Division’s multiyear enforcement initiative, which focused on various sectors of the Long Island restaurant industry. In addition to identifying wage violations and recovering money for underpaid workers, the initiative’s goal is to permanently change industry behavior to ensure proper compensation for all workers and a level playing field for all employers.
The FLSA provides restaurant workers’ rights to be paid at least the federal minimum wage of $7.25 per hour, as well as time and one-half their regular rates for every hour they work beyond 40 per week. The law also requires employers to maintain accurate records of employees’ wages, hours and other conditions of employment, and prohibits employers from retaliating against employees who exercise their rights under the law. The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and liquidated damages payable to the workers.
Store Managers at Dunkin Donuts Will Receive $200,000 in Back Wages in Department of Labor Settlement
The operator of 55 Dunkin Donuts franchise locations throughout New Jersey and Staten Island, N.Y., has agreed to pay $197,787 in back wages owed 64 employees after an investigation conducted by the U.S. Labor Department’s Wage and Hour Division found minimum wage and overtime violations of the Fair Labor Standards Act.
Investigators from the division’s Southern New Jersey district office found that Edison-based QSR Management LLC, did not pay overtime to store managers, as required by the FLSA. QSR incorrectly claimed its managers at all 55 locations were exempt from overtime. Aa result of these violations, 56 non-exempt store managers will be paid a total of $197,550 in back wages. Investigators also found that at two locations management took tips from customer service workers to cover register shortages, resulting in minimum wage violations.
“The FLSA was passed 75 years ago with minimum wage and overtime provisions to protect workers and level the playing field for employers. There are exemptions to some provisions but employers are responsible for determining exactly when and how these exemptions apply,” said Patrick Reilly, director of the division’s Southern New Jersey Office. “These managers worked long hours and are entitled to the protection the FLSA affords them. An employer’s failure to pay overtime when required gives them an unfair competitive advantage, violates the rights of the employee, and will not be tolerated.”
Department of Labor investigators found that store managers were treated as exempt from the overtime requirements and argued that these managers were salaried. The company actually treated them as hourly employees, reducing their pay when they worked less than 60 hours in a week. Although the Fair Labor Standards Act allows an overtime exemption for management employees who perform certain job duties, the exemption only applies if the managers receive a guaranteed weekly salary of at least $455. Though these managers performed the duties required for the exemption, QSR failed to pay its managers a guaranteed weekly salary in all workweeks, and therefore store managers were entitled to overtime pay for hours worked in excess of 40 in a workweek. QSR has assured compliance with the FLSA and has agreed to pay all back wages. As part of its commitment to future compliance, QSR has changed its employee handbook to reflect its intent to properly apply any valid exemptions, and to no longer allow management to take tips from employees.
The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and ½ the regular rate of pay for all hours worked over 40 hours in a workweek. However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a) (1) and Section 13(a) (17) also exempt certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.
There is a hiring boom of part-time workers in the restaurant industry as a result of a new federal law requiring certain employers to provide health insurance to its workers, according to a recent article in the Wall Street Journal.
A recent report conducted by the United States Department of Labor, leisure and hospitality businesses have hired more workers in June than any other industry and, since April, restaurants and bars have added an average of 50,000 jobs a month. But, in response to the Affordable Care Act, a growing number of restaurants are adding part-time workers rather than traditional full-time.
The Affordable Care Act (“ACA”) requires employers with 50 or more full-time employees to offer affordable insurance to employees who work 30 or more hours a week. In an effort to circumvent the costs of the ACA, restaurants and other businesses have increased their staff by hiring more part-time employees to replace full-time workers who have left. Others attribute the increase of part-time workers in the restaurant industry to a stronger economy. Still, some restaurants say that they will continue to rely on part-time workers in order to minimize health care costs.
The Fair Labor Standards Act (“FLSA”), which was signed into law by Franklin Delano Roosevelt on June 25, 1938 outlawed “oppressive child labor,” imposed a federal minimum wage of 25 cents per hour, and required overtime for hours worked over 40 in a week. But the America we live in is far different from that which existed 75 years ago and both employee advocates and company executives have raised serious questions as to how well the FLSA is currently working. Read the full article written Louis Pechman, founder of waiterpay.com, on The Huffington Post.