This October, two small Tennessee restaurant chains have been found guilty of illegally retaining servers’ tips, violating wage and recordkeeping laws, and violating child labor laws. Fines between the two companies totaled over $750,000. We always stress the importance of working with a reputable Payroll/HR company that is knowledgeable in the legal field, and one that is not afraid to have tough conversations regarding potential illegal activity. Massive fines like these can easily be avoided with proper guidance and ethical leadership. Let’s dive in and see how exactly these companies messed up, and how you can protect your business from any precarious legal situations in the future.
On October 5th, The Department of Labor fined a Tennessee Greek Cafe $188,728 for back wages owed to 65 employees, as well as for recordkeeping violations regarding minors. The Department of Labor investigation determined the restaurant owners kept a percentage of servers’ tips illegally to use for business expenses and to pay the hourly wages of employees. Interestingly, under certain circumstances the law does in fact allow employers to take a portion of tips. However, the employer’s must be paying those workers the federal minimum wage of $7.25 per hour.
Four days later on October 9th, a separate small Tennessee Mexican restaurant chain was ordered to pay $563,350 in back wages to 120 employees after the Department of Labor found it violated minimum wage and overtime rules. The Mexican Restaurant kept a portion of servers’ tips and paid other workers a flat salary regardless of how many hours they worked. They also failed to record all of the hours employees worked, which is a huge Payroll recordkeeping infraction. In addition, the restaurant chain was also fined $683 for violating child labor laws by forcing a 15-year-old to work outside of allowed hours, and above the legal limit of hours allowed.
The Department of Labor found the company unable to account for paying minimum wage while also taking tips, resulting in the employer having to pay fines for the full federal minimum wage the servers would have earned and more. Even worse, the Department of Labor discovered the employer failed to maintain the records showing the dates of birth for four minor employees; a severe FLSA recordkeeping violation.
We strongly encourage business owners to contact Southern Payroll and Benefits or The Department of Labor with any questions regarding tip credit rules, Payroll laws, recordkeeping laws, Bookkeeping laws, or any other wage requirements to verify that you meet your legal obligations. The last thing that we want to see during these stressful COVID times is for a small business to end up in an unfortunate situation with the law, and it is our responsibility to keep you informed. These investigations help remind all business owners to review their legal and ethical practices, and ensure that they are paying their workers as the law requires. The Department of Labor is committed to leveling the playing field for all employers who play by the rules. We are determined to keep you informed about staying compliant with the law.
For any questions or concerns about your company’s compliance, you can always call 423-207-2497 for expert advice and solutions. It is never too late to reach out for help. You can also visit our website or email support@southerpb.website for more information and assistance.
Businesses in Chattanooga, TN, trust Southern Payroll & Benefits with a variety of outsourced HR services, from payroll, to insurance benefits, and tax processing. We partner with you to insure your comfort and to advise on best-practices and compliance requirements. Southern Payroll offers one-month free payroll to all clients, along with no annual contracts, to make sure that we exceed expectations daily. We are also extremely proud of our 2% initiative, in which 2% of all payroll proceeds will be donated to the 501(c)3 approved charity of each client’s choosing. For more information about how we can help your business, schedule a meeting or call (423) 207-2497 today.