U.S. Department of Labor Fines Restaurant $154,033 for Tip and Overtime Violations
Summary: The U.S. Department of Labor’s Wage and Hour Division (WHD) found that a restaurant withheld employee tips and failed to pay overtime. The employer must now pay back wages and liquidated damages to affected workers.
Overview of the Case
The U.S. Department of Labor’s Wage and Hour Division (WHD) investigated a restaurant in South Carolina and determined that the employer violated multiple provisions of the Fair Labor Standards Act (FLSA). The violations primarily involved improper handling of employee tips and unpaid overtime.
Findings of the WHD Investigation
During the investigation, WHD found that the restaurant:
- Illegally withheld tips that customers intended for employees.
- Failed to pay overtime to employees who worked more than 40 hours in a workweek.
- Did not maintain accurate and complete time and pay records.
Penalties and Financial Impact
As a result of these violations, the employer was ordered to pay $154,033 in back wages and liquidated damages to 10 affected employees. In addition to repaying workers, the restaurant faces ongoing scrutiny and potential reputation damage within the industry.
Why This Matters for Restaurant Owners
This case is a clear reminder that even unintentional mistakes in wage and hour practices can lead to serious consequences. Restaurant owners and operators face significant risks if their tip policies, timekeeping systems, and overtime calculations are not fully compliant with federal and state laws.
Common consequences of non-compliance include:
- Federal investigations by the Wage and Hour Division (WHD)
- Back wage payments and liquidated damages
- Civil money penalties
- Potential collective or class-action lawsuits
- Damage to the restaurant’s brand and reputation
Common Mistakes That Lead to Violations
Many restaurants unknowingly put themselves at risk by:
- Allowing managers or supervisors to participate in tip pools
- Improperly using the tip credit without proper notice to employees
- Failing to pay overtime after 40 hours in a workweek
- Not tracking off-the-clock work or pre-shift duties
- Keeping incomplete or outdated employee and payroll records
How Restaurants Can Prevent Similar Violations
To reduce the risk of costly investigations and penalties, restaurant owners should:
- Conduct a wage and hour compliance audit, focusing on tips and overtime.
- Review and update tip pooling and tip credit policies.
- Implement accurate time keeping and record keeping systems.
- Train managers and supervisors on wage and hour laws.
- Work with HR compliance professionals who understand the restaurant industry.
To understand how these violations happen and how to prevent them, read our Ultimate Guide to Wage & Hour Compliance for Restaurants.”
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