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New York Pizzeria Forced to Pay $178,000 in Damages After Department of Labor Investigation

A New York pizzeria has been ordered to pay $178,000 in back wages and damages after a U.S. Department of Labor investigation uncovered multiple violations of the Fair Labor Standards Act (FLSA), including improper overtime practices, invalid tip pooling, and unlawful pay methods for both kitchen and tipped employees.

The Wage and Hour Division (WHD) found that the employer systematically underpaid workers through a combination of incorrect pay structures, inaccurate wage calculations, and mismanagement of tips.

Overview of the Investigation

According to the Department of Labor, the pizzeria committed several wage and hour violations, including:

  • Paying non-exempt kitchen employees a fixed salary, regardless of hours worked

  • Failing to pay overtime after 40 hours in a workweek

  • Calculating overtime incorrectly for tipped employees

  • Rounding weekly wages up or down, resulting in inaccurate pay

  • Operating an invalid tip pool that violated FLSA regulations

These violations resulted in $178,000 in back wages and liquidated damages owed to employees.

Key Violations Identified by WHD

1. Unlawful Flat Salary for Kitchen Workers

The employer paid kitchen staff a fixed salary, regardless of how many hours they worked.
Under FLSA, non-exempt employees must be paid:

  • An hourly wage

  • Overtime at 1.5 times the regular rate after 40 hours

Flat salaries for hourly workers are almost always illegal.

2. Incorrect Overtime Calculation for Tipped Employees

The pizzeria calculated overtime based only on the cash wage paid to tipped workers instead of the full minimum wage, which is a common but serious violation.

Federal law requires overtime to be calculated using:

✔ Full minimum wage × 1.5
➜ Not the reduced tipped wage

3. Rounding Wages Up or Down

The employer routinely rounded weekly wages, which resulted in employees being paid less than what they legally earned.

Rounding that consistently benefits the employer is unlawful.

4. Invalid Tip Pooling System

WHD found that the pizzeria:

  • Included employees who do not customarily receive tips

  • Operated a tip pool without proper written notice

  • Failed to ensure all tips went directly to tipped workers

Any of these violations render a tip pool invalid under FLSA.

Financial and Legal Consequences

As a result of these violations, the employer was required to pay:

  • $178,000 total in back wages and liquidated damages

  • Full restitution for improper overtime and tip violations

  • Corrective actions to bring payroll and tip systems into compliance

Improper pay practices often lead to:

  • Civil money penalties

  • Additional WHD oversight

  • Wage theft lawsuits

  • Reputational damage

Why This Case Matters for Restaurant Owners

This case is a textbook example of the most common mistakes made by restaurant owners, especially those with tipped and back-of-house staff.

The violations found include:

  • Flat salaries for non-exempt workers

  • Incorrect overtime calculations

  • Invalid tip pools

  • Inaccurate payroll records

These mistakes are rarely intentional — but the financial consequences are serious.

Even small administrative errors can quickly escalate into five- or six-figure penalties.

How Restaurants Can Avoid Similar Violations

To prevent costly wage and hour violations, restaurants should:

  • Conduct a wage and hour compliance audit

  • Ensure overtime is calculated correctly for all employees

  • Avoid paying flat salaries to non-exempt workers

  • Review tip pooling and tip credit practices regularly

  • Maintain accurate timekeeping and payroll documentation

  • Train managers on FLSA wage requirements

Being proactive is the only reliable way to avoid federal investigations and lawsuits.

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 Violations Turn Into a $178,000 Penalty

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