IHOP Restaurants Sued $500,000 for Wage Theft Violations

The U.S. Department of Labor has filed a complaint in federal court against two Illinois IHOP franchises and their owner after its investigation identified numerous violations, including management telling servers to surrender their tips to a shared tip pool when, in fact, the owner was keeping the tips for the restaurant or sharing them with back-of-the-house employees not eligible to participate in a mandatory tip pool. 

In addition to violating tip pool regulations, the Department of Labor also learned the restaurants and owner skirted federal law and shortchanged employees’ wages in the following ways:

·      Directing managers to delete entire shifts from time records when workers approached 40 hours in a workweek to avoid paying overtime.

·      Frequently failing to pay workers the required minimum wage.

·      Paying some employees “straight time” for hours over 40 in a workweek, when overtime was required.

·      Using the federal minimum tipped wage of $2.13 per hour instead of the higher Illinois minimum wage when computing servers’ overtime rate — if they paid an overtime premium at all.  

Department of Labor investigators determined that the IHOP Restaurants owed approximately $367,890 and also assessed a civil money penalty of $199,577 for the employers’ willful violations. 

The FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or indirectly or through a tip pool. A valid tip pool is limited to employees who customarily and regularly receive tips. A Department of Labor representative stated: “Tips are the property of the employee who earned them and no employer has the right to them. The owner allegedly retained IHOP workers’ tips for his businesses — literally taking money from employees’ pockets — in clear violation of federal wage laws. “This action and several others that deprived many low-wage workers of their hard-earned earnings led us to assess nearly $200,000 in penalties given the extensive nature of wage theft our investigators found.”

In another recent case, a former waiter for IHOP brought an action under the FLSA and the New York Labor Law (“NYLL”), asserting claims for unpaid overtime, “spread of hours” compensation and other wage theft violations. The waiter sometimes worked over sixty-eight hour a week but was not paid minimum wage or overtime pay. That wage theft lawsuit against IHOP settled for $100,000.

In a case involving an IHOP Assistant Manager in Staten Island, Pechman Law Group obtained a $40,000 settlement to resolve a lawsuit for unpaid overtime wages. That lawsuit alleged that the worker was misclassified as an Assistant Manager so he would be “exempt” from the FLSA requirement to receive overtime pay at time and half for hours worked over forty in a workweek.

As these cases illustrate, even established companies like IHOP sometimes cheat their workers out of overtime pay. If you believe that you are a victim of wage theft, feel free to contact the attorneys at Pechman Law Group at 212-583-9500.

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