Wage Theft In the Restaurant Industry


Restaurants Routinely violate Overtime Laws

The Wall Street Journal recently reported that wage lawsuits against restaurants have proliferated in troubling and damaging numbers:

“…The number of wage-violation lawsuits has been on the rise for more than a decade, driven by a successful worker-organization movement, increased attention by plaintiffs’ attorneys and complicated labor laws that leave some employers confused, according to legal analysts and industry leaders.

Nationwide, these lawsuits have doubled in the last 10 years in federal courts. In Texas, the number of these lawsuits continues to increase as well. The US Department of Labor recently reported that its wage and hour division found violations in 95 percent of its investigations of Austin-area restaurants between Oct. 1, 2015 and June 30, 2016. 

So why do the vast majority of restaurant employers continue to violate wage laws despite news reports of DOL investigations and lawsuits? Simple. Because they believe the risk of getting caught is low and it is very profitable for them to continue to break the law rather than pay their employees fairly.

If you work for a restaurant, you should take a close look at your pay check/stub. It is particularly common for restaurants to require employees to work “off the clock” so that the aren't paid for all time worked or do not qualify for overtime. Recently many restaurants have been sued for overtime claims by workers:

  • Wolfgang Puck's Restaurant Employees Settle Overtime Claim - Employees working for Wolfgang Puck’s restaurants in California have settled a class action wage and overtime lawsuit. The $1.7 million settlement gained approval from a California federal judge recently. 
  • Settlement In Overtime Pay Suit Against TGI Friday’s - The plaintiffs in an overtime lawsuit filed against TGI Friday’s in New York have agreed to settle their collective action suit against their former employer for violations of the Fair Labor Standards Act (FLSA). The company will pay the nine former workers representing the class between $1,900 and $48,000 each, for a total settlement amount of $225,000.
  • Applebee’s Franchise Faces Overtime Lawsuits - In New York, 4,000 current and former employees are pressing claims against Apple-Metro, an Applebee's franchise company.

What types of claims are Most common?

1) Improper Use of Tip Credits to Commit Wage Theft

In most restaurants, waitstaff make a substantial portion of their wages from tips. But even servers who earn a high amount in tips are still entitled to a base wage. It’s illegal for employers to pay their workers solely through customer tips collected.

If a server makes more than $30 on average every month in tips, he or she is considered a “tipped employee” under the FLSA. The restaurant is allowed to take a “tip credit,” which reduces its wage obligations in proportion to how much a server makes in tips. But there’s a hard limit to this credit: $5.12 per hour. A server's hourly wage must be at least $2.13 every hour, since $2.13 and $5.12 add up to the federal minimum wage of $7.25. So, if you are a server making less than $2.13 an hour in base wages, it’s very likely that you’re employer is breaking the law.

Additionally, every server must receive AT LEAST the minimum wage of $7.25 per hour in combined base wages and tips. If it is a slow day and not much in tips are earned, the restaurant must increase the base wage of the server so that the minimum hourly rate is met. 

2) Tip Pool Violations

Some restaurant employers will “pool” all the tips earned in a given period and then divide them up among their employees. This is legal if only tipped employees are allowed to share in the pool’s payout. Restaurants sometimes violate the law by splitting the tip pool with workers who don’t ordinarily receive tips (like managers, dishwashers and other back of house staff). Restaurants do this because it allows them to use tip money to pay back of house employees that they would normally have to pay a full wage to.

Make no mistake, this type of tip pool splitting with non-tipped employees is illegal. Unfortunately, servers and other tipped employees often don't even know the employer is splitting the tip pool illegally. So if you are a tipped employee, keep a lookout for how that tip pool is being split and who is being included in the split.

Also note that only tips in excess of the amount used for the tip credit may be used for a tip pool.  This means if an employer requires you to participate in a tip pool, your contribution to the tip pool cannot reduce your wages such that your “server wage rate” plus your take-home pay are not equal to, or greater than, the minimum wage.

3) Not Paying Full Minimum Wage for Side Work or Requiring Off-The-Clock Work

Some tipped workers are required to perform “side work,” tasks for which they don’t receive tips. When a server isn’t serving, but has to fold napkins or brew coffee, that's "side work".  Side work is often required pre-shift or post-shift (cleaning, filling salt shakers, etc.) Side work must be paid time and it often must be paid at the full minimum wage rate. If a tipped employee spends more than 20% of their time performing side work, that time needs to be paid at the full federal minimum wage instead of the lower “tip credit” base wage.

A related issue involves requiring workers to work through breaks or meal periods but clocking them out as if they actually received the break. This is illegal. If your employer provides meal and rest breaks, but does not allow you to use them and fails to pay you for the work you perform instead of taking a break, you may have a claim for unpaid overtime wages.

If you think your employer is violating overtime laws and you aren't being properly paid under the law, contact us immediately. The deadlines to take action on such claims are short so don't wait.