The hospitality business just doesn’t get it, apparently. Despite years of legislation, enforcement by the US Department of Labor, private litigation, class actions, public approbation and shaming of violators – wage theft persists and, some would say, is rampant in the hospitality industry.

Consider the following:

  • Pelton Graham recently recovered well over $10 million on behalf of employees at a handful of popular NYC diners for a variety of violations:
    • Paying back-of-house employees a flat weekly salary with no overtime, while scheduling them to work up to 60 hours per week. The salaries paid often failed to cover minimum wage for all hours worked. 
    • Deducting time for meal breaks when breaks were rarely taken. 
    • Paying front-of-house employees in cash, off-the-books at a rate of $2 to $5 dollars per hour, well below the tipped minimum wage and without regard to overtime requirements.  
    • Delivery employees often had credit card tips stolen.    
  • Pelton Graham recovered over $2 million on behalf of servers at a popular sushi restaurant. The servers were paid a relatively high base hourly wage, but were required to hand over all cash tips to management while credit card tips were simply retained by the business.  
  • Two large Tennessee restaurant chains settled a wage theft claim for over $1 million in March 2021.
  • A Georgia restaurant was forcing workers to cash their paychecks and return the money to the owner, thus keeping only their tips. The US Department of Labor leveled a $123,000 fine.
  • The beat goes on – The DOL has issued no fewer than 60 press releases in the first six months of 2021 announcing resolutions of wage theft claims.

Common wage theft scenarios:

  • Tip pooling. Tip pools are intended to equalize the tip income for tipped workers. Employers violate the law when they allow ineligible workers, like managers, owners, porters and kitchen staff to participate in the tip pools.
  • Off the clock work. Team meetings, rolling cutlery and folding napkins, deliveries, and other duties after punch out are common practices that violate the wage and hour laws, while other restaurants simply don’t pay for all hours punched.
  • Manager classification. Managers are not required to be paid overtime after 40 hours in a week, all others are. This tempts employers to “misclassify” workers as managers, when they really are not. A bartender might be called an “assistant bar manager,” a hostess might be called the “scheduling manager,” etc. At Pelton Graham we are experienced with misclassification in its many guises. 
  • Rounding. Whether applied to hours, pay, or tips, rounding is appropriate only under specific and limited circumstances. Rounding, when permissible, never overrules the minimum wage and overtime laws.  
  • Uniform charges, uniform cleaning, requirements to furnish tools, payment for short cash drawers – all can lead to an overall wage that is less than the minimum required and are illegal if they do. 
  • Overtime Paid in Cash at Straight-time Rates. Restaurants often pay employees for forty hours on-the-books while paying overtime in cash at straight-time rates, claiming that it is a win-win as the employee will not need to pay taxes on the money. This is unlawful and cheats workers of their rightful overtime wages.
  • Automatically deducting 30 minutes or an hour each day for a meal break, even though employees rarely are able to take a break.
  • Paying employees who perform largely cleaning or other non-tipped generated work the tipped minimum wage when they are ineligible to do so. Typically, employees must spend 80% of their time on tip eligible work to be able to utilize the tipped minimum wage. 

New developments:

  • Increase in minimum pay to qualify as a no-overtime manager. The federal minimum salary is currently $35,568/yr, but it is important to look to see if your area has a higher minimum salary rate. For example, in New York and California the limits are:
    • $58,500/yr in New York City; 
    • $54,600 in Long Island & Westchester; 
    • $48,750 in the rest of NY State; 
    • $58,240 in California for white-collar workers at firms with 26 or more employees; or $54,080 for white-collar workers at companies with 25 or fewer employees.

Individuals who are paid less than these amounts must be paid overtime after 40 hours in a week, regardless of their duties. Those paid above that level still must be true “managers” to be denied overtime.

How we can help:

At Pelton Graham we are up-to-date on all the developments in employment law and particularly in regards to wage theft. We are in frequent contact with the US Department of Labor and know where in that massive organization to find the answer to your issue, and often succeed where the DOL does not when filing claims in state and federal courts.

Notice all the class actions discussed in the examples? Group relief is very often appropriate in wage theft situations and Pelton Graham is positioned to advance the interests of you and your co-workers. If your case is specific to just your situation and doesn’t justify separate legal representation, Pelton Graham can help you contact the Department of Labor to pursue your case.

And remember, although we focus here on the hospitality industry, wage theft happens in many occupations that might surprise you; think pharmaceutical sales representatives, insurance claims adjusters, financial advisors, mortgage loan officers, insurance and bank underwriters, automotive service advisors, various types of drivers, and more. 

No matter what industry you are in, Pelton Graham is here to help. Contact us today for a no-obligation, no-cost discussion of your situation.


Photo by Ketut Subiyanto from Pexels