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:
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An hourly wage
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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:
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Included employees who do not customarily receive tips
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Operated a tip pool without proper written notice
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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.”
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