$1,179,045 in Back Wages and Liquidated Damages to be Paid by Restaurant Chain for FLSA Violations

Friday, April 22, 2016

Investigators from the U.S. Department of Labor’s Wage and Hour Division, Columbia District Office, found that La Hacienda restaurants of Charleston, South Carolina and its owners violated overtime, minimum wage and recordkeeping provisions of the Fair Labor Standards Act at 13 establishments in the Charleston area. Specifically, the division found minimum wage violations of the FLSA that stemmed from the employer’s practice of requiring servers to give a percentage of their tips back to the employer, and requiring three servers to work for only tips. Under the FLSA, tips are the property of the employees who receive them; however, restaurant operators can benefit by claiming a credit, based on the tips, toward their obligation to pay those employees the full minimum wage. When an employer does not comply with the requirements to use the tip credit, the credit may be denied and the employer will be required to pay the full federal minimum wage, currently $7.25 per hour for all hours worked. The employer also required workers at some locations to purchase their uniforms, which reduced their earnings below the minimum wage. The division also found the employer failed to pay cooks, dishwashers and runners for all hours worked which resulted in these employees not earning minimum wage for all of their hours and not receiving time-and-one-half for their hours worked beyond 40 in a workweek. The employers failed to keep legally mandated time and attendance records.

On April 18, 2016, Judge C. Weston Houck, of the U.S. District Court for the District of South Carolina, Charleston Division, approved a consent judgment between the department and La Hacienda and its owners, Antonio Ayala and Jaime Tinoco. La Hacienda and its owners will pay a total of $1,179,045 to 119 employees, which includes $589,523 in back wages and an additional equal amount in liquidated damages for all affected employees who worked at any of the 13 restaurants from Aug. 13, 2011 to Dec. 13, 2014. The employers have agreed to comply with the FLSA. The investigation was litigated by the department’s Regional Office of the Solicitor in Atlanta.

Under the FLSA, when customers tip employees, restaurant operators can benefit by claiming a credit toward their obligation to pay those employees the full minimum wage. An employer that claims this tip credit is required to notify its employees of its intention to take a tip credit, and to pay a tipped employee not less than $2.13 per hour in direct wages. If an employee’s tips, when added to the wages paid directly by the employer, do not equal the federal minimum wage of $7.25 per hour the employer must make up the difference. The federal minimum wage of $7.25 per hour was last increased in 2009, and the minimum cash wage for tipped workers was last increased in 1991. Tips are the property of the employee who receives them. The FLSA also requires that employees receive time and one-half their regular rate of pay, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Additionally, employers must maintain accurate time and payroll records.

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