The restaurant business is notoriously difficult. According to one study, about 60 percent of new restaurants fail within three years of opening. Restaurant owners work long hours in a highly competitive industry, with high turnover and extensive regulations. The persistent economic slowdown has added more pressure, with many cutting leisure expenses like dining out. Now comes another hurdle in the form of Big Brother, who is watching closely to make sure restaurant owners are complying with wage and hour laws. 

Restaurateurs and contractors beware

Several states are focused on restaurateurs, whom they view with a suspicious eye as a result of reports that owners are taking unfair advantage of uneducated and, often, immigrant populations.

For example, in early March, New York Attorney General Eric Schneiderman announced that Veranda, a restaurant in the Greenwich Village section of New York City, had agreed to pay $200,000 after an investigation that included state and federal wage violations and retaliation allegedly stemming from attempts to silence employees.

On March 8, the California Department of Industrial Relations announced that 14 San Francisco restaurant workers would receive in excess of $230,000 for unpaid overtime. Notably, the state worked with several Asian community organizations in its investigation.

On April 18, the U.S. Department of Labor’s (DOL) Wage and Hour Division launched an enforcement and education initiative focused on restaurants in the vicinity of Los Angeles. The DOL’s focus is on overtime and wage and hour violations.  The DOL announced similar efforts targeting San Francisco and Portland, Ore. restaurants on April 2 and 5 respectively.

The courts, too, have been tough forums for restaurant owners.  For example, on March 5, eight New York restaurants owned by celebrity chef Mario Batali and his partner, Joseph Bastianich, agreed to pay $5.25 million to settle a class action alleging tips were unlawfully withheld.

On May 2, the U.S. District Court for Kansas ordered the owners of China Star of Wichita Inc., to pay $223,394 in back wages and liquidated damages to 11 employees for contempt of an order requiring China Star to comply with the Fair Labor Standards Act (FLSA). 

The scrutiny isn’t just on restaurant owners—contractors also are under the microscope.  In Massachusetts, on March 8, Attorney General Martha Coakley announced that three companies that perform drywall installation, sewer cleaning and waste disposal work had agreed to pay a total of $2.8 million in restitution and fines for, among other things, misclassifying employees as independent contractors. On March 20, the DOL sued a Kentucky cable installation business to recover overtime pay for 165 installers allegedly classified as independent contractors in violation of the FLSA. 

The emphasis is on lower-paid workers

Given the reality that many wage and hour enforcement actions involve minimum wage and overtime claims, it is no surprise that lower-paid employees in various industries are in the sights of government agencies. For example, on March 6, California Labor Commissioner, Julie Su commenced two lawsuits against three Los Angeles car washes for more than $3 million in damages for wage and hour violations. The DOL announced on March 12 and 13 that it is paying special attention to the hotel and motel industries in Texas and Louisiana due to widespread violations of minimum wage and overtime requirements. 

On April 26, the DOL won a default judgment from a suburban Chicago cleaning services company that allegedly concocted a scheme to misclassify 75 workers as independent contractors.

On May 3, the DOL announced that a Minnesota landscaping company had agreed to pay $500,000 in back overtime, damages and penalties for FLSA violations. 

Only the foolish are not paying attention

Whether conscious or negligent, any business that fails to pay employees minimum wages or overtime, or who it declares them to be independent contractors when they are not or who simply does not pay attention to the host of state and federal requirements for the payment of wages is asking for trouble. The Feds are watching; so are the states and community activists. Comply or risk the consequences.  Employers, the odds are no longer in your favor.