New Overtime Settlement: Restaurant Must Pay $200K in Back Wages, Plus Penalty

An Oregon restaurant recently learned a costly lesson about overtime and tip pool rules after a federal investigation found it had shortchanged 19 employees.

The U.S. Department of Labor’s (DOL) Wage and Hour Division investigated Taste of India 1, a restaurant in McMinnville, OR, and found two violations of the Fair Labor Standards Act (FLSA).

According to the investigation, the restaurant:

• Paid 19 non-exempt employees straight time rather than the required time-and-a-half for all hours worked over 40 in a workweek, and
• Ran an invalid tip pool, using workers’ tips to supplement base wages rather than distributing them to eligible employees.

The agency determined the violations were willful and assessed civil money penalties on top of the back wages owed.

As a result of the investigation, the division recovered:

• $200,137 in back wages, and
• $15,256 in civil money penalties.

DOL Guidance on Overtime and Tip Pool Compliance

Overtime and tip pool compliance are two of the most common – and costly – mistakes employers make under the FLSA.

Non-exempt employees must be paid time-and-a-half for every hour over 40 in a workweek. Paying straight time for overtime hours – even if an employee agrees to waive OT pay – is a violation. For more about the overtime premium under the FLSA, see the DOL’s fact sheet on overtime pay.

And tip pool rules are strict under the FLSA: Employers, managers and supervisors cannot keep employees’ tips or participate in a tip pool. An employer cannot retain tips to offset minimum wage obligations except through a valid tip credit. For more info on tip pool rules and the FLSA, see the DOL’s fact sheet on tipped employees.