ATLANTA—The U.S. Department of Labor’s Wage and Hour Division has identified significant violations of the Fair Labor Standards Act and has obtained remedies for them at 28 Huddle House restaurants in Georgia, Missouri and West Virginia.
Corporate franchisor Huddle House Inc. has agreed to facilitate compliance among all its franchisee-operated restaurants as well as to assist the division in promoting industrywide compliance with the FLSA.
In addition, minimum and overtime back wages totaling $60,594 will be paid to 128 employees. Finally, the division assessed $48,317 in civil money penalties for repeat and child labor violations.
The investigation covered the Huddle House restaurant in Springfield, along with those in Adel, Barnesville, Buford (two restaurants), Calhoun, Cedartown, Dallas, Douglas (two restaurants), Dublin, Elberton, Gray, Jeffersonville, Marietta, Milledgeville, Reidsville, Rockmart, Rome, Royston, Sandersville, Summerville, Swainsboro, Sylvania, Toccoa and Waynesboro, West Plains, Mo. and Buckhannon, W.Va.
The division’s investigations were initiated under a multiyear enforcement initiative focused on the restaurant industry in Georgia, where widespread noncompliance with the FLSA’s minimum wage, overtime, record-keeping and child labor provisions had been found, particularly among companies that use a franchise business model. Of the investigated establishments, most of the violations were found at the 25 franchisee-owned Huddle Houses as opposed to three that are corporate-owned. The division included investigation of Huddle Houses in Missouri and West Virginia.
Investigators found that some Huddle House employees did not receive at least the minimum wage because the cash wage paid by the employer plus tips received did not equal minimum wage for all hours worked, and in other cases, employees only received tips and were not paid a cash wage. Additionally, some employees’ pay dropped below the minimum wage because they were required to share tips with non-tipped employees, or because deductions were made for breakage losses, damages and check-cashing fees. Salaried nonexempt employees, such as cooks, were paid a salary that did not equal minimum wage.
Overtime violations involved tipped employees not receiving overtime at the correct rate and salaried nonexempt employees not receiving overtime pay, as well as overtime paid to some employees after 80 hours in a two-week period rather than after 40 hours in a workweek. The child labor violation involved a 15-year-old employee who was allowed to work more hours than permitted by the FLSA, which limits minors to no more than three hours on a school day or 18 hours in a school week.
“This enforcement initiative is aimed at strengthening compliance among restaurants operated as franchises. The division has found many FLSA violations in this highly competitive industry sector resulting from practices, such as requiring employees to work exclusively for tips, paying cash wages that fall below the federal minimum wage, making illegal wage deductions and failing to pay proper overtime compensation to tipped and salaried employees,” said Janet Campbell, director of the Wage and Hour Division’s Atlanta District Office.
To assist its franchise restaurants in complying with federal labor regulations, Huddle House has committed to taking the following measures: requiring franchisees to attend FLSA compliance training, encouraging continued participation in regularly offered training sessions, requiring FLSA posters at all establishments, checking for posters during regular unit evaluations, and creating business incentives that reward compliance behavior among franchisees and managers. Huddle House also has invited Wage and Hour Division representatives to conduct compliance training sessions at the company’s annual conventions.
“We are pleased that Huddle House is pursuing broader measures to educate its franchisees on FLSA requirements and is assisting the division in promoting a stronger culture of compliance in the restaurant industry. The company’s efforts are commendable and should remind all employers that paying fair wages and complying with the law is good for business,” added Campbell.
The FLSA requires payment of at least the federal minimum wage of $7.25 to covered, nonexempt employees for all hours worked. It also requires that employees receive time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Additionally, employers must maintain accurate time and payroll records.
An employer of a tipped employee is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage of $7.25 an hour. If an employee’s tips combined with the employer’s direct wages do not equal the minimum wage, the employer must make up the difference. Employers may create a tip-pooling or sharing arrangement among employees who customarily and regularly receive tips, but a valid tip pool may not include employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs and janitors.
Finally, paycheck deductions for patrons who do not pay for their orders, broken dishes or cash register shortages are illegal if they reduce an employee’s wages below the minimum wage.
For more information about the FLSA, call the Wage and Hour Division’s Atlanta office at 404-893-4600, or its toll-free helpline at 866-4US-WAGE (487-9243). Information is also available on the Internet at http://www.dol.gov/whd.