Restaurants and Other DOL "Priority Industries" Must Ensure Compliance with FLSA Regulations

El Azteca Restaurant recently agreed to pay $700,000.00 in back wages and liquidated damages for alleged Fair Labor Standards Act (“FLSA”) violations, settling a United States Department of Labor (“DOL”) enforcement action.[1]  The DOL’s investigation allegedly uncovered basic FLSA violations, including paying non-exempt employees flat salaries regardless of their total hours worked; deducting uniform costs from employees’ pay that resulted in paying employees below the minimum wage; inaccurately recording hours worked; and in some cases, denying wages for all hours worked.[2]  The settlement is the DOL’s latest attempt to scrutinize the restaurant industry,[3] and according to DOL Secretary Thomas Perez, the DOL will continue to scour the restaurant and other Priority Industries for FLSA violations. [4] 

The DOL has identified eleven “Priority Industries” for FLSA compliance, including the following: (1) Restaurant; (2) Hotel/Motel; (3) Residential Construction; (4) Janitorial Services; (5) Moving/Logistics; (6) Agricultural; (7) Landscaping/Horticultural Services; (8) Health Care Services; (9) Home Health Care Services; (10) Grocery; and (11) Retail.[5]  If your company falls within one of the DOL’s “Priority Industries,” we recommend auditing your company pay practices and policies to ensure the company complies with both federal and state wage laws.  It is extremely important to follow all FLSA laws applying to your company, but essential that your company complies with the “basic” FLSA laws such as paying at least minimum wage and overtime to your hourly, non-exempt employees.  Otherwise, disgruntled employees may bring wage claims for what would be considered “basic” FLSA violations that will, in most cases, lead the DOL to investigate all company pay practices and policies.  For restaurants and companies with multiple locations, you must also ensure that management, in all locations, is well trained on federal and state wage laws, understands how to apply those laws, and consistently applies wage laws throughout the company.  Employers, regardless of “Priority Industry” status, should also prepare for the December 1, 2016 DOL changes to the white-collar exemptions (see related article), as these changes will significantly increase the number of non-exempt employees and provide yet another DOL rule for which companies must comply.

 

[1] Perez v. El Azteca Rest., 1:15-221 (E.D. Wis. consent judgment June 28, 2016).

[2] Ben Penn, Perez Calls $700K Judgment ‘Wake-Up Call’ for Restaurants, Bloomberg BNA Daily Labor Report (July 6, 2016). 

[3] In fiscal year 2015, the DOL recovered $38.1 million in back wages for restaurant employees, more than double the $17 million recovered in 2009.  See Ben Penn, Perez Calls $700K Judgment ‘Wake-Up Call’ for Restaurants, Bloomberg BNA Daily Labor Report (July 6, 2016). 

[4] See Penn, supra note 2. 

[5] See David Well, Improving Workplace Conditions Through Strategic Enforcement: A Report to the Wage and Hour Division, DOL (May 2010) (available at: https://www.dol.gov/whd/resources/strategicenforcement.pdf) (last accessed July 7, 2016).

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