El Azteca Restaurants in Wisconsin to Pay $700,000 to Employees for Violations of FLSA

Thursday, July 7, 2016

According to federal investigators, El Azteca restaurants in Appleton, De Pere and Neenah paid employees wages below the federal minimum wage and often did not pay for overtime.  Under terms of a consent judgment entered in U.S. District Court for the Eastern District of Wisconsin, the restaurants and their owners and managers – Marco Montalvo, Fe Montalvo and Sergio Jimenez – will pay 129 current and former employees a total of $700,000, including $350,000 in back wages and additional $350,000 in liquidated damages. The companies and individual defendants will also pay $25,000 in civil money penalties for violating the Fair Labor Standards Act. The judgment resolves a lawsuit filed by the U.S. Department of Labor in February 2015.

The suit follows an investigation by the department’s Wage and Hour Division that found the companies and individual defendants failed to pay kitchen staff and servers at least the federal minimum wage, and overtime for hours worked beyond 40 in a workweek at the four Wisconsin eateries.

Investigators found the restaurants failed to comply with the FLSA’s minimum wage, overtime and record-keeping provisions by:

  • Failing to record daily and weekly work hours and earnings accurately, resulting in not only a recordkeeping violation but also in the employer failing to pay employees for all the hours that they worked.  
  • Paying kitchen staff flat salaries without regard to the number of  hours they worked, resulting in violations of the overtime regulations when these employees worked over 40 hours in a workweek and were not paid overtime.
  • Making illegal deductions from servers’ and bussers’ pay for uniform shirts, nametags and aprons, resulting in minimum wage violations.  

Under the agreement, the company will pay back wages and an equal amount in liquidated damages as follows:

  • El Azteca of Appleton Inc., known as El Azetca-Appleton North, 39 workers will receivea total of $188,761.
  • El Azteca of Neenah Inc., 29 workers will receive a total of $192,699.
  • El Azteca of Kimberly Inc., known as El Azteca-Appleton East, 33 workers will receive a totalof $222,914.
  • El Maya Mexican Restaurant Inc., 28 workers will receive a total of $95,624. The restaurant was formerly known as El Azteca Restaurant of De Pere, Inc.

The court action enjoins the defendants from violating the FLSA in the future and requires significant changes in their business practices. The defendants are required to provide training to managers and employees on the FLSA to ensure compliance at all locations.

The consent judgment also requires the employer to:

  • Provide every current and future employee with the following Wage and Hour Division publications in both Spanish and English:
    • “Work Hours Record Keeper,” a publication they can use to track their hours.
    • A Handy Reference Guide to the Fair Labor Standards Act.
    • Fact sheets for workers in the restaurant industry.
  • Provide each employee with the Wage and Hour Division’s phone number.
  • Provide each employee on each pay date with a pay stub, showing the specific dates of the pay period, total hours worked and paid, rate of pay, overtime hours paid, overtime rate of pay, gross amounts paid and all deductions taken by defendants. The stub must show all pay and deductions regardless of whether the pay was by check or in cash. 
  • Conduct quarterly reviews of time and payroll records at each location.

Additionally, if owners Marco and Fe Montalvo sell business assets prior to completing payment of the back wages, damages and penalties, the proceeds of the sale must go directly toward the debt owed to the workers.  The consent judgment also states that if the individual defendants sell their primary residence, the Secretary of Labor will place a lien on any new residence purchased.

Under the FLSA, restaurant operators can claim a credit for tips received toward their obligation to pay tipped employees the full minimum wage. An employer that claims this tip credit is required to pay a tipped employee only $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 at least the federal minimum wage of $7.25 per hour the employer must make up the difference. Tips are the property of the employees who receive them.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular hourly rates for hours worked beyond 40 per week. The FLSA provides that employers who violate the law are, as a general rule, liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees. Additionally, the law requires employers to maintain accurate time and payroll records and prohibits retaliation against employees who exercise their rights under the law. 

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