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Employee Misclassification Leads to Nearly $1M in Back Pay for 30 Restaurant Workers

August 24, 2011

According to a recent wage and hour lawsuit settlement that our Riverside, California employment attorneys have been watching, two Florida restaurants will pay $934,425 in back pay and other monetary damages to 30 employees--after the restaurant were found by the U.S. Department of Labor (DOL) to have engaged in employee misclassification, and violated the overtime compensation, record-keeping and minimum wage provisions of the Fair Labor Standards Act (FLSA).

The DOL investigation reportedly found that two La Nopalera Mexican Restaurants and their owners improperly classified kitchen employees as exempt from the overtime provisions of the FLSA, and were paid a flat salary without receiving overtime compensation for working over 40 hours in a week of work. Other tipped employees reportedly received their tips along with paychecks that would equal the minimum wage--but were required by the restaurant management to sign the checks and then return them, wherein the checks would be cashed with the money returned to the restaurant. Although it looked as if the employees were being paid fair wages, in actuality, they were only able to keep their earned tips for compensation. The employers also failed to maintain any proper records of the employees' hours worked.

As our Costa Mesa labor and employment attorneys have reported previously in a California employment lawyer blog post, under the FLSA, it is mandatory for employers to compensate workers with the federal hourly minimum wage rate and overtime payment of time and one half their regular wage rates for any hours worked beyond forty in a workweek.

The FLSA does allow employers to take credit from tips that goes toward the minimum wage payment for tipped workers, as long as certain conditions are properly met. Employers are required to pay tipped workers a cash wage of $2.13 for each hour, or the state required cash wage--whichever cash wage is higher--and employees are required to keep all tips except for any contributions made toward the company's tip pooling arrangement, that must be validated. Also, it is mandatory for employees to be aware and informed about the tip credit provision and the tip amount added to cash wages that must equal $7.25, the hourly federal minimum wage. The law also requires employers to keep proper records of all employee hours worked, wages and any employment conditions.

The DOL reports that the 30 misclassified kitchen employees will receive $584,425 in back wages and an additional $350,000 in liquidated damages. The judgment also hold both the restaurants and owners liable for any future violations of the FLSA, along with payment of the back wages.

Employment misclassification is a serious employment issue affecting many workers in "high-risk" industries, like the restaurant business, that employs low-wage workers. The misclassification of employees deprives workers of important employment benefits like minimum wage and overtime compensation, among other benefits that employers are legally required to cover under the FLSA. The act of employee misclassification also gives dishonest employers an unfair competitive advantage, hurting honest employers who follow state and federal wage and hour laws.

Howard Law, PC represents individuals who have been victims of employee misclassification and other federal and California State wage and hour violations. For a free consultation, contact us today.

2 Jacksonville, Fla., restaurants and owners ordered to pay more than $934,000 to 30 workers following US Labor Department investigation, The U.S. Department of Labor Press Release, August 18, 2011

Related Web Resources:

U.S. Department of Labor: Wage and Hour Division (WHD), Fair Labor Standards Act (FLSA)

Department of Labor (DOL): Wage and Hour Division (WHD)

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