What? Eating Out Again?

My wife and I just moved for the first time in over 18 years. Everyone who has ever moved (i.e., everyone reading this blog) surely knows that your restaurant expenditures go through the roof because all your stuff is in boxes for much longer than you really would have hoped.

Perhaps that explains why, for the second time in a row, I am blogging about wage and hour problems in the restaurant industry. Two weeks ago, I wrote about a restaurant that settled a case over the alleged mishandling of tips and, significantly, how poor recordkeeping can make it virtually impossible to document compliance with the rules.

I noted that lesson isn’t valuable just for restaurateurs, good recordkeeping is a critical element of federal contract compliance.

As I sat down to write my blog this week, I discovered that the Department of Labor has just filed a lawsuit alleging that a Missouri restaurant flat out botched virtually every minimum wage and overtime requirement. So, like my wife and I, here I am back in the restaurant world.

DOL is claiming that a single restaurant could be on the hook for nearly $2 million in back wages and liquidated damages for 26 affected workers over a three-year period covered by its investigation. According to DOL, the restaurant paid its back of house personnel (i.e., cooks, dishwashers, and the like) on a salary basis such that these employees did not receive compensation for overtime hours. DOL further says that the restaurant’s front of house employees’ compensation was limited to their tips and no wages whatsoever. Of course, since they weren’t being paid any wages, they didn’t receive any overtime compensation—again, DOL says their pay was whatever they got in tips.

If all this is true, wow. Most of our clients are experienced government contractors who generally get the basics right. I’m not talking to you.

But for some of you, I guess I really have to say this. The United States has a nationwide law that requires the payment of minimum wages and overtime.

It’s the Fair Labor Standards Act. 29 U.S.C. § 201, et seq. Look at section 206. You have to pay $7.25 per hour to nonexempt workers. Many states, Missouri included, require the payment of higher minimum wages. There are some options that allow payment of salaries; however, whatever method you use, the regular rate of pay has to meet the applicable hourly minimum wage. Period.

If an employee works in excess of 40 hours in a workweek, you gotta pay overtime. 29 U.S.C. § 207(a). Generally, that’s one-and-a-half times the regular rate of pay. Again, period.

And for you aspiring Michelin star emporia, your tipped employees have to receive some portion of their compensation in wages. Under the FLSA, you can use tips as a credit against the total minimum wage, but you still have to pay a minimum wage of $2.13 per hour regardless of what tips are received. The state you’re in may have a higher rate. But… if the worker’s tips don’t exceed the total minimum wage, you have to make up the difference. And then you have to make sure they receive sufficient compensation for any overtime hours. DOL has published a fact sheet that explains how the tipped employee rules work, which you can find here. https://www.dol.gov/agencies/whd/fact-sheets/15-tipped-employees-flsa. DOL’s regulations can be found here: https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-A/part-531/subpart-D.

Of course, there can be wrinkles in a given situation, but the basic requirements are straightforward. If your establishment is doing something a little different, you might want to seek some advice from smart folks like us.

I get that the restaurant business is tough, especially now. Food costs have skyrocketed. Minimum wages are increasing all over the place. Rents are through the roof. And then there are us customers who gripe about the prices on your menus.

But don’t let these pressures drive you to skirt these rules. If DOL prevails in its lawsuit, a $2 million liability won’t go down easily.