Restaurants have become the newest targets for wage and hour attorneys. Restaurants are particularly susceptible to wage claims for a variety of reasons. Actions that increase risks to restaurant owners include paying employees cash without taking the proper precautions, failing to strictly adhere to the tipped-employee exemption to the Fair Labor Standards Act, and failing to accurately record the time employees work. Mishandling these issues have left restaurant owners open to suits brought by disgruntled employees claiming wages and overtime wages.
Wage and hour cases pose a particular risk to restaurant owners. In Maryland, employers do not only face the Fair Labor Standards Act, but also the MarylandWage and Hour Law, and the Maryland Wage Payment and Collection Law. Each of these acts not only provide for the payment of the unpaid wages, but also liquidated damages, attorneys’ fees, and costs for an employee. To make matters worse, restaurant owners who take part in the management of the restaurant can be personally liable for these damages.
Restaurant Owners are Being Targeted for Wage and Hour Cases
Restaurants are a fast-paced business with extreme income changes that may occur weekly, monthly, or even seasonally. Moreover, the wage and hour laws are complicated and utterly unforgiving making it easy to target specific industries. For all these reasons, restaurant owners need to be aware of at least the basics in preventing these suits from happening.
Paying employees in cash poses unique risks to employers. Many employees and plaintiff’s attorneys believe paying employees in cash is inherently illegal. It is not.
However, paying cash increases the risk for a wage and hour suit not only because of this mistaken belief in illegality, but because employers have heightened requirements in proving the payments actually occurred. Paying cash is legal as long as the proper taxes are paid, the employee acknowledges receipt of the cash in writing, and the records of those transactions can be introduced in defending against any subsequent litigation. Generally, paying cash is not advised. However, there are some circumstances where it may be necessary. Restaurant owners should protect themselves in these situations.
One of the biggest issues that come back to harm employers is the tipped-employee exemption to the Fair Labor Standards Act. The tipped-employee exemption allows employers to pay employees who regularly receive tips less than the minimum wage as long as the tips receive make up the difference. However, this exemption requires strict adherence to what would appear to be trivial issues. For example, an employer needs to inform an employee at their hire that they intend to use tips to make up the difference in the minimum wage requirements. This is best done in the form of a written document that is signed for by the employee.
Also, non-tipped employees such as managers or owners cannot take part of a tip pool, even if they are performing the duties of a tipped employee. Finally, the employee has to be able to keep all the tips the employee earns, though tip pools in certain circumstances can be utilized. Failure to strictly adhere to any of these requirements results in the exemption being invalidated, and the employer owing the employee the difference between the tipped wage and the minimum wage. This also results in liquidated damages, attorneys’ fees, and the costs of the litigation.
Another issue that restaurant owners face is the accurate tracking of hours. The Fair Labor Standards Act and the Maryland Wage and Hour Law requires the payment of at least the minimum wage for all hours worked, and time and a half for all hours worked in excess of 40 in each work week. The inability to demonstrate how many hours an employee actually works leads to lawsuits with very little ability to defend the claim of the employee for lost wages.
Overtime Hours and Pay
Another major issue is that hours, and especially overtime hours, should be calculated on a weekly basis and not by pay period. For example, an employee who works 30 hours in one week, and 50 hours in the second week is entitled to ten hours of overtime pay. Employers who calculate by pay period on a biweekly payroll would calculate these hours as 80 hours total, and fail to pay overtime wages. This minor issue can have significant impact as Plaintiff’s attorneys can attempt to claim attorneys’ fees in these cases based on any recovery whatsoever.
While a proper defense may make this a difficult if not impossible task for plaintiff’s attorneys, hiring a less savvy attorney to defend a wage and hour case can result in significant fees with any recovery no behalf of the plaintiff.
As with all litigation, hiring the right attorney is critical in defending against these claims. The right attorney is not the most expensive, but rather the attorney who knows these claims and how to defend them. The right attorney hired before litigation can help eliminate or at least dramatically reduce liability for these claims.
Our FLSA Defense Attorneys Can Help
The right attorney at the start of litigation can take steps to eliminate the issue of attorneys’ fees down the line. The right attorney works with the client to ensure that the defense of these claims amounts to a reasonable cost, with effective counsel.
Contact us to let us help you avoid these types of lawsuits.