In the past three decades, more than 23,000 restaurants, bars, and fast food establishments have been prosecuted by the Department of Labor for wage and hour violations. In fact, 1 in every 5 cases the DOL investigates is targeted at the restaurant industry.
But that's not even the most shocking statistic.
As a result of those investigations, the food service industry has paid more than $247 million in back wages and civil money penalties.
And keep in mind that these numbers only represent successful government prosecutions brought on by the U.S. Department of Labor. Each year, thousands of additional FLSA (Fair Labor Standards Act) cases are filed privately by employment attorneys — making for a much more startling total sum.
In fact, the number of private prosecutions has risen more than 450 percent within the last 20 years alone, and experts predict that those numbers will only continue to climb — especially in the food service industry where wage and hour claims are rampant.
The Root of the Wage and Hour Claims Problem
It's not that restaurant and bar owners are bad employers or somehow more prone to making costly wage and hour mistakes. As employment law specialist Daniel Abrahams says: "A dispute with the DOL or a group of employees doesn't mean you're a bad employer. It just means that you ran afoul of some very complicated rules. There's no shame to be had in not knowing all the rules offhand, or running into trouble with these requirements." So then, what causes these wage and hour claims to arise in restaurants?
Multiple Restaurant Locations
Unfortunately, due to the nature of the industry, restaurants and bars are in a particularly vulnerable position. Managing multiple locations can make it difficult to accurately track employee hours, curb overtime, or ensure employees are taking their required breaks — three "minor" violations that can lead to big trouble with the FLSA.
Employee Scheduling Structure
Additionally, employees within the food service industry rarely work 9 to 5 — and those irregular schedules can lead to unauthorized overtime or off-the-clock work violations. Approximately 80 percent of wage and hour prosecutions by the DOL involve overtime violations. Yikes.
On top of all these issues, more than 65 percent of employees still use paper timesheets or spreadsheets to track their hours, as opposed to integrating an employee scheduling software into their POS. This dated format of record keeping can result in sloppy records, inaccurate payroll, disputed wage and hour claims, and - you guessed it - unintentional FLSA violations .
Minimum Wage Disputes
Finally, many food service employees are low to minimum wage workers — which means they carry with them a slew of potential minimum wage violations. In fact, according to the DOL, minimum wage violations are "most prevalent in the service occupations." Because of this, they plan to "redouble enforcement efforts and partnerships to ensure workers [in the food service industry] take home the wages they earned and deserve."
What Does That Mean for Your Restaurant?
Just ask the El Azteca Restaurant Group of Wisconsin. They were recently ordered to pay 129 current and former employees across four locations a total of $700,000 after the DOL discovered the companies and individual owners had failed to pay kitchen staff and servers the federal minimum wage (among other accusations).
"We see far too many violations like these in the restaurant industry," said U.S. Secretary of Labor Thomas E. Perez. "This consent judgment should serve as a wake-up call to restaurant owners and the industry that the U.S. Department of Labor takes these violations very seriously and will continue to use every tool at our disposal to ensure workers get the money they have earned."
With that in mind, the likelihood of getting hit with a costly wage and hour lawsuit is growing larger by the day — especially for bar and restaurant owners.
If you happen to find yourself in the crossfire, here's what you can do.
How to Address FLSA Cases & Wage and Hour Claims
1. Move Quickly
According to Daniel Abrahams, "One of the biggest mistakes you can make is failing to plead what's called 'affirmative defenses' quickly enough…. You have a very short period of time to figure out what the facts are and determine your answer. Failing to respond within the time frame allotted can mean that the statute of limitations is void in the case … and that you're liable for damages dating even further back."
On top of that, if you're found to be the cause of the wage and hours claim dispute, you'll be required to pay the employee's attorney fees as well. In short, the more time you spend seeking out legal counsel and gathering the necessary paperwork, the more expensive the entire ordeal will be.
2. Be Cooperative
Abrahams warns business owners to "be respectful of the wage and hour investigators, with a goal of conciliating, settling, and resolving these issues short of litigation (if you can), or joining litigation as soon as possible."
Behaving antagonistically towards the DOL or your employees' legal counsel only makes things worse — and it can delay your settlement. Remember, a drawn out case is an expensive case — so be cooperative and do whatever it takes to settle.
Employment attorney Maria O. Hart adds, "This means cooperating with your own counsel as well…. Respond to our emails, give us the documents we need, and help us help you!"
3. Know Your Number
If you have violated FLSA - purposefully or not - you will probably end up owing money in damages.
"You're looking to settle," Hart says, "which means you need to know your number. What can you afford? What's your value? Have a good conversation with your attorney to find out what it's going to take — have a conversation with your finance department too."
Knowing your number from the start in all wage and hour claims decreases the amount of time spent in negotiation and allows you to move quickly. After all, "time is ticking!" Hart warns.
4. Take Corrective Action
According to attorney Lee Schreter, "You're stuck with the facts. But you do have the opportunity to cut off your damages by correcting the error moving forward. If you continue to accrue liability in an FLSA case, most confident plaintiffs' counsel are going to bring the case as a continuing violation. So it's not only a case that looks backwards, but it's a case that moves forward every day. And, as you move forward, you pick up liability and you pick up additional plaintiffs."
And Hart agrees, "In order to cap damages," she says, "make changes quickly so that it's not considered an ongoing violation."
But Abrahams warns business owners not to be too hasty. "I advise my clients to take corrective action all the time," he says, "but there's a trade-off in litigation you should be aware of. The question is, will this action look like an admission of liability with respect to your past conduct or behavior?" He recommends working closely with your employment counsel to determine when to take corrective action and how to communicate the change.
5. Be Proactive
"Employers need to do their own preventative self audits in advance," advises Abrahams. "Self audits go a long way to avoiding these kinds of unpleasant surprises." He suggests auditing your own business at least once a year by taking a good, long look at compensation, payroll, and classification of workers. This can help to avoid and alleviate wage and hour claims.
Additionally, Hart recommends creating a paper trail using HR documentation or an automated time tracking system. "That's an attorney's best friend," she says, "to have documents that show what you were doing, not doing, and so forth. Document, document, document."
Finally, Abrahams suggests seeking out employment counsel right now. "There's so many cases under the FLSA," he says, "you can't read them all! … But I do think there are significant cases you should scrutinize very carefully, particularly in your jurisdiction. You need counsel who will alert you to those cases and keep tabs on the evolving nature of the law."
Be Smart - Protect Your Restaurant, Your Staff, and Yourself
Even those with the best intentions can get caught up in trouble with FLSA violatons. You can circumvent problems like these with planning and using the proper technology and software to keep your systems and finances in place. This will help to alleviate any disputes over wage and hour claims in your restaurant.
If the time comes when you are investigated for a violation or faced with an FSLA lawsuit, be humble and respectful to all parties involved. This will save everyone much trouble and could result in less financial problems moving forward.
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