Minimum Wage Violations in the Restaurant Industry

By Marjorie Obod Attorney, Dilworth Paxson LLP | October 28, 2008

The hospitality industry is particularly susceptible to minimum wage violation because of the unique compensation methods used industry wide. Minimum wage violations can result in potential civil litigation which can be both costly and time consuming for an employer. As a result this article attempts to highlight various issues surrounding minimum wage compliance.

Generally, the Fair Labor Standards Act (FLSA) establishes minimum wage regulations affecting both full-time and part-time employees. Workers covered under the act (which includes bartenders, servers, valet personal etc.) are entitled to a minimum wage rate of $5.15 an hour.

Typical compliance issues include: (1) failure to maintain records, (2) illegal deductions from pay for items like cash register shortages, uniforms, errors, bad checks etc. (3) insufficient tips to make up the difference between the employer's direct wage obligation and the minimum wage (4) employees receiving tips only and (5) sharing a portion of tipped employees' tips with employees who are not eligible because they do not normally receive tips.

Consequence of a Violation

Where an employee has been underpaid in violation of federal law, the Department of Labor has the authority to recover back wages administratively or through court action. Violations may result in either civil or criminal action. In 2005, the Employment Standards Administration's Wage and Hour Division (WHD) recovered more than $166 million in back wages for over 241,000 employees- a 26% increase over 2001. WHD specifically monitors low-wage industries (restaurants, hotels and motels, janitorial services etc.) because of a history of chronic violations. Specifically, last year, 4,829 cases were handled regarding restaurants resulting in $13,800,956 in back wages awarded. Hotel employees were awarded $2,847,607 and custodial engineers were awarded $3,408,819. These awards can have devastating effects on some employers particularly mid to small sized restaurants.

For more information regarding compliance, contact the nearest WHD office of the United States Government Labor Department.

Choose a Social Network!

The social network you are looking for is not available.

Close

Hotel Newswire Headlines Feed  

James Downey
Boaz Ashbel
David Lund
Andrew Glincher
Blake Suggs
Frank Meek
Michael S. Wasik
Arthur Spaulding, Jr.
Jacqueline Clarke
Christopher Manley
Coming up in March 2019...

Human Resources: An Era of Transition

Traditionally, the human resource department administers five key areas within a hotel operation - compliance, compensation and benefits, organizational dynamics, selection and retention, and training and development. However, HR professionals are also presently involved in culture-building activities, as well as implementing new employee on-boarding practices and engagement initiatives. As a result, HR professionals have been elevated to senior leadership status, creating value and profit within their organization. Still, they continue to face some intractable issues, including a shrinking talent pool and the need to recruit top-notch employees who are empowered to provide outstanding customer service. In order to attract top-tier talent, one option is to take advantage of recruitment opportunities offered through colleges and universities, especially if they have a hospitality major. This pool of prospective employees is likely to be better educated and more enthusiastic than walk-in hires. Also, once hired, there could be additional training and development opportunities that stem from an association with a college or university. Continuing education courses, business conferences, seminars and online instruction - all can be a valuable source of employee development opportunities. In addition to meeting recruitment demands in the present, HR professionals must also be forward-thinking, anticipating the skills that will be needed in the future to meet guest expectations. One such skill that is becoming increasingly valued is “resilience”, the ability to “go with the flow” and not become overwhelmed by the disruptive influences  of change and reinvention. In an era of transition—new technologies, expanding markets, consolidation of brands and businesses, and modifications in people's values and lifestyles - the capacity to remain flexible, nimble and resilient is a valuable skill to possess. The March Hotel Business Review will examine some of the strategies that HR professionals are employing to ensure that their hotel operations continue to thrive.