$54,721 in Back Pay and Penalties to be Paid by Ohio Restaurant for an Illegal Tip Pool

Wednesday, June 19, 2013

Sanchez Corp., which operates as Rancho Fiesta Restaurant in Mansfield, has agreed to pay a total of $51,949 in back wages to 18 employees following an investigation by the U.S. Department of Labor’s Wage and Hour Division that disclosed violations of the Fair Labor Standards Act’s minimum wage, overtime pay and record-keeping provisions. The company was also assessed a total of $2,772 in civil money penalties for repeat violations of the FLSA.

Investigators found that Rancho Fiesta had an illegal tip pool where management deducted 3 percent of a waiter’s gross sales from the waiter’s tips and used it to pay nontipped employees. The restaurant did not record the amount of tips withheld from the waiters and to whom the money collected in the tip pool was paid. There were no records to indicate that tipped employees in the restaurant received enough in tips to bring them up to the federal minimum wage. Additionally, the restaurant failed to compensate employees for all hours worked, resulting in additional minimum wage violations. It also failed to pay overtime premiums for hours worked beyond 40 in a workweek. The restaurant failed to maintain accurate records of employees’ wages and work hours, and there were no payroll records for two employees.

A total of $2,772 in civil money penalties were assessed for repeat violations of the FLSA. The company was investigated in 2010 and paid $354 in back wages to one employee.

Under the FLSA, tips are the property of the tipped employee and/or employees participating in a valid tip pool. An employer cannot require servers to turn in tips. Additionally, an employer of a tipped employee is required to pay no less than $2.13 an hour in direct wages, provided that amount, plus the tips received, equals at least the federal minimum wage of $7.25 per hour. If an employee’s tips, combined with the employer’s direct wages, do not equal the minimum wage, the employer must make up the difference. Employers also are required to provide employees notice of the FLSA tip credit provisions.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates of pay for hours worked beyond 40 per week. Simply paying employees a salary does not exempt them from minimum wage and overtime protections. Employers also are required to maintain accurate time and payroll records and to comply with the hours, hazardous orders and other restrictions applying to workers under age 18.

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