Restaurants traditionally have had their share of wage and hour issues, and for restaurants in Tampa, the year 2012 kept firmly with tradition.  WHD recently announced that its 2012 Tampa Restaurant Initiative, which consisted of more than 80 investigations, resulted in nearly $500,000 in minimum wage and overtime violations under the FLSA.  Violations included:

  • requiring employees to work for tips only;
  • making deductions for walkouts, breakages, and cash register shortages; and
  • incorrectly calculating the overtime rate of pay for servers.

WHD’s press release also clearly demonstrates two of the enforcement strategies that it has been threatening to implement since 2009:  (1) partnerships with state agencies; and (2) the assessment of liquidated damages.  The Tampa office of WHD has collaborated with the Florida Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco to ensure FLSA compliance in the restaurant industry.  Much more significantly, however, WHD sought civil money penalties and liquidated (i.e., double) damages.  With respect to liquidated damages, WHD stated:

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.

Assessment of liquidated damages “as a general rule” is a sharp departure from WHD’s enforcement practices of the past 70-plus years.  This departure has been anticipated for quite some time, having been rolled out first in the Northeast Region of WHD, and now in the Southeast Region.  The remaining three regions of WHD are expected to implement the “liquidated damages as a general rule” policy by the end of the year, although all offices continue to seek liquidated damages in appropriate cases.

Whoa . . . Double Damages?

Yes, double damages.  This means that even small violations can quickly add up to crippling liability.  “Routine” investigations can become fights to save your business.  With the increased number of WHD investigators around the country -- and the decision of DOL not to furlough WHD investigators as a result of the sequester -- many more employers are being investigated than ever before.  The restaurant industry will continue to operate under the WHD microscope.  And Tampa restaurants?  Sorry to say that WHD’s initiative will continue into 2013.

Well . . . What Should We Do?

 It is critical that you take the opportunity now to review your practices to ensure that you are in compliance.  For tipped employees, restaurants subject to the FLSA (rules and amounts are different under the laws of several states) must pay a minimum cash wage of $2.13 per hour, provided that the employee earns enough in tips to bring their total hourly earnings to more than $7.25.  (For now.)  Deductions for walkouts, breakages, and cash register shortages generally may not take an employee’s earnings below minimum wage.  When the employee is a server earning the $2.13 minimum, this typically means there is no permissible deduction.  Finally, where a tipped employee works more than 40 hours in a workweek, his or her overtime rate is based on $7.25 per hour, not $2.13 per hour, although the employer may still use the same tip credit as was used in the non-overtime hours.  (For those of you without a lawyer-to-English dictionary, in the case of an employee earning $2.13, the overtime cash wage is $10.88 [which is $7.25 * 1.5] - $5.12 [which is $7.25 - 2.13], or $5.76 per overtime hour.)

The WHD is not simply focused on the restaurant industry, however.  All employers should take the time to review exempt classifications, independent contractor arrangements, overtime rates of pay, and deductions, among many other obligations.  Failure to pay attention to wage and hour issues may get your name in a press release . . .

“What Happened, Dude?” is a weekly blog post in which we break down recent enforcement activity by the U.S. Department of Labor’s Wage & Hour Division (WHD), look at what went wrong for the employer, and share some lessons for other employers.