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Dec 01 2011

Feds Hit Long Island Restaurants Hard for Fair Wage Claims

In any case anybody hasn’t been paying attention, Federal and State Departments of Labor (DOL) have been hitting restaurants for Fair Wage Claims very aggressively in 2011. Trust me, it won’t slow down in 2012. Yesterday’s Newsday reported that the Federal DOL had reached a settlement with over 30 restaurants totaling $2.3 Million in claims.

Here’s a link to the article: www.newsday.com/business/feds-recover-2-3m-in-li-wage-violations-1.3354801″

Hardest hit was Mama’s Restaurant in Copiague which had to pay $800,000 in back overtime wages.(that does not include a penalty to the DOL) Here’s what its owner had to say about it:

“You can’t win with the Labor Department,” he said Tuesday. “Everybody was getting paid. I just wasn’t logging it down.”

And he’s probably telling the truth. Because how most restaurants get in trouble is
by having poor record-keeping. If yo don’t have the forms and records that DOL wants you to maintain, then whatever your employee says about how many hours he worked and how much he was paid is presumed to be true. Its a hard and uphill battle to establish that the employee is either lying or inaccurate. Its why we have been advising our restaurant clients to install a time clock and make sure all staff clock in and out at the start of their shifts and during meal and other breaks. Theo other way food service businesses get walloped is by paying flat wages to hourly employees. For example, if your dishwasher gets paid $8 per hour, say (Fed minimum wage is $7.25) for a 40 hour work week. That comes to $320 for the week. Now if he works 10 additional hours that week, at mandatory time and a half, he would be entitled to an overtime check of $120 for a total weekly wage of $440. OK, no problem right, let’s just pay him $450 a week every week and you’re covered, right? And when DOL asks you how much you’re paying him you tell them all of the foregoing, and its all straightened out right? Wrong! DOL regulations state than any employee (who is not managerial) who is paid a consistent flat wage is presumed to receive that wage for his $40 hour work week unless you have clear proof of the actual hours he worked and provided he was given written documentation of what part of his flat wage constituted regular pay and OT. So now look what happens. DOL will take that $450 and divide it by $40 to come up with an hourly wage of $11.25. They will then multiply that by 1.5 to come up with an OT wage of $16.87. They then apply that to the 10 hours of OT you admitted he works to get $168.70 that he is owed per week. If he worked for you for two years (the statute of limitations on these claims) that’s 50 weeks per year (they give you credit normally for 2 vacation weeks) times 2 years equaling 100 weeks of OT owed which amounts to a nice fat check to the dishwasher for 16,870! Do you now understand why its critical for restaurants to keep track of wages and break it down to their employees? Especially since DOL can go up to three years if they think its a willful or intentional violation and can add up to a 100% matching penalty to the government. So that record-keeping violation on one employee can easily cost the establishment $33,000.

All signs point to even stricter enforcement in 2012 as this is a huge money maker for the cash strapped governments. You thought red-light cameras were a boon to the State and County deficit? This program not only results in penalties being paid to the hungry government, but puts a lump sum of cash into a worker’s hands who then presumably has to pay tax on it and then spends it in the economy. The government sees this as a win-win situation, forgetting the impact it has on the business that funds the settlement.

All restaurant and hotel owners would be wise to make sure they are in compliance with the time and record keeping requirements of the Fair labor Standards Act and the NYS Dept of Labor regulations. Otherwise they could be facing claims similar to these restaurants and there isn’t enough Alka Seltzer in the world to calm that stomach ache down.

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