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3 Common Types of Overtime & Labor Law Violations by Restaurants

Courts across the country are cracking down on restaurants that blatantly violate the Fair Labor Standards Act by not providing service and non-service personnel with fair pay. 

There are 3 main ways in which Restaurants continue to violate the FLSA laws regarding overtime and labor:

  1. Day Rates & Fixed Salaries
  2. Tip Pool Violations
  3. Illegal Deductions

1. Day Rates & Fixed Salaries

A chef creating his dish

Cooks and kitchen workers are notorious for working long, hard hours. Some restaurants try to shirk their legal duty by paying workers a set amount per day (day rate) or a fixed salary that does not provide them with adequate compensation and cheats them out of overtime pay. 

Recently, in Ann Arbor Michigan, seven restaurants were forced to pay nearly $150,000 to more than 100 employees for their wage and hour violations. While some of the restaurants blamed clerical or computer information as the reason, the investigation found serious violations in multiple restaurants. Some non-exempt employees were paid salaries and no overtime when they routinely worked in excess of 60 hours a week, and poor record-keeping and misclassification of employees caused some employees to earn less than minimum wage.

In another case, a restaurant chain in Davie, FL, had to pay $314,553 in back wages to 65 employees.  The restaurants were paying cooks, dishwashers, and kitchen helpers a flat daily rate or on a salary basis regardless of the number of hours they worked and failed to pay them overtime pay when they worked over 40 hours per week.

2. Tip Pool Violations

dirty dishes

The Fair Labor Standards Act establishes clear guidelines regarding the rules for pooling of tips; but employers continue to violate the law.

Employers may not keep tips received by employees

An employer can require tipped personnel such as waiters, waitresses, counter personnel, bussers and bartenders to combine their tips into a shared tip pool. The tip pool may be shared among “back of house” workers who do not customarily receive tips, such as dishwashers, expeditors or chefs – if the employer does not take a tip credit. However, this tip pool cannot include individuals who are owners, managers or supervisors, regardless of whether the employer takes a tip credit.

Including improper workers in a tip pool can invalidate the entire tip pooling arrangement and result in workers being owed significant amounts of back pay.

The labor laws do not specify a specific monetary amount or percentage that employees must contribute to tip pools. However, the employer is required to inform the employees of any such arrangement and is prohibited from retaining the tips for his or her own purpose.

In the Florida case mentioned above, it was also found that the restaurant illegally diverted all gratuities to the restaurant instead of giving them to the employees as required by the FLSA.

Penalties for Tip Pool Violations.  Employers who withhold tips from employees in violation of the law will be liable to employees for the the amount of any tip credit taken and the amount of all tips withheld, plus an equal amount of liquidated damages (double backpay).

3. Illegal Deductions

paycheck

Another common FLSA violation of overtime pay laws in restaurants is making illegal deductions to employees’ pay. Many restaurants are run by small business owners, so when they lose money due to broken plates or customers skipping out on the bill, they may try to recoup these losses by taking them out of the employees’ checks. However, this type of behavior is often illegal.

In the Ann Arbor restaurant case, investigation also revealed that restaurants were making deductions from employees’ paychecks for uniforms, breakages and shortages in the cash register. These actions caused the employees to be earning less than minimum wage.

Are You Owed Overtime Pay? Find Out so you Don't Miss Out.

At The Lore Law Firm, we represent employees across the nation who work hard but are not being properly compensated for their work. We have successfully represented employees in all kinds of different jobs in overtime wage and hour claims when employers violated the rules.

If you work in the restaurant industry and have questions about whether or not you have been properly paid for overtime, we can help answer your questions.

Call 1-866-559-0400 or use our evaluation form for a FREE and CONFIDENTIAL review of your situation.