Wage & Hour Violations Cost Chicago Restaurant $697,000 in Back Wages Under Increased DOL Enforcement
A popular Chicago restaurant has been ordered to pay $697,295 in back wages to 60 employees after a federal investigation uncovered serious wage and hour violations, including workers receiving tips only as their primary form of compensation.
This case reflects the U.S. Department of Labor’s intensified enforcement actions under the Biden administration, particularly targeting food service establishments where wage and hour violations are widespread.
What the Investigation Found
The U.S. Department of Labor’s Wage and Hour Division (WHD) determined that the restaurant:
Allowed employees to work for tips only, without proper hourly wages
Failed to pay the required minimum wage
Did not pay overtime for hours worked beyond 40 in a week
Misused the tip credit, violating key FLSA requirements
Did not maintain accurate timekeeping or payroll records
Failed to ensure employees received all tips they earned
These violations led WHD to recover $697,295 in back wages owed to 60 affected workers.
Illegal Tip Practices Triggered Major Penalties
Key findings revealed that the restaurant:
Relied on customer tips as the sole compensation for some workers
Failed to pay full cash wages to tipped employees
Did not provide the mandatory tip credit notice
Improperly allocated tips to cover wages
Did not ensure tipped workers were earning at least the required minimum wage
Under the Fair Labor Standards Act (FLSA), employers cannot use tips as a substitute for wages.
Why This Case Matters for Restaurant Owners
This Chicago case sends a clear message:
Federal regulators are prioritizing wage violations in the restaurant industry.
Restaurants that rely heavily on tipped labor are at high risk because:
Tip credit rules are complex
Managers often misunderstand what is legal
Poor documentation leads to automatic liability
Off-the-clock work is common
Dual jobs (tipped vs. non-tipped duties) are hard to track
Employees are now more aware of their rights
Even small administrative mistakes can escalate into six-figure penalties.
Financial Consequences for the Employer
The consequences of these violations included:
$697,295 in back wages
Liquidated damages equal to unpaid wages
Potential civil money penalties
Mandatory changes to payroll practices
Increased federal oversight
Significant reputational harm
For many restaurants, penalties of this size can threaten long-term stability and operations.
Common Wage & Hour Violations in Tipped Restaurants
Restaurants often unknowingly break federal law by:
Paying workers tips only
Applying the tip credit incorrectly
Not paying overtime properly
Allowing off-the-clock work
Failing to track tipped and non-tipped duties
Missing key onboarding and payroll documentation
Misclassifying workers or paying day/weekly rates
These issues are among the most common triggers of WHD investigations.
How Restaurants Can Protect Themselves
To avoid costly enforcement actions like this Chicago case, restaurants should:
Conduct a wage & hour compliance audit
Review all tip credit and tip pooling practices
Ensure overtime is calculated and paid correctly
Implement accurate timekeeping systems
Maintain clear documentation for all employees
Train managers on wage and hour laws
Work with HR compliance professionals experienced in hospitality
Being proactive can prevent severe financial and legal consequences.
To understand how these violations happen and how to prevent them, read our Ultimate Guide to Wage & Hour Compliance for Restaurants.”
Protect Your Restaurant Before a Wage & Hour Violation Becomes a $697,000 Problem
Most restaurants discover their violations only after an investigation has already begun.
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