The U.S. Department of Labor recently announced that two Philadelphia restaurants J.H.S.K, Inc. and Osaka Japan Restaurant, Inc., both doing business as Osaka, and their owner, have agreed to a consent judgment ordering them to pay $935,000 in back wages and liquidated damages to 201 employees for willful violations of the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The employers must also pay a $65,000 civil money penalty. The consent judgment, according to the Department of Labor, must be approved by the U.S. District Court for the Eastern District of Pennsylvania.

The employers agreed to the $1 million settlement midway through the first day of a weeklong bench trial. The consent judgment permanently enjoins the employers from violating the FLSA in the future.

Investigations conducted by the U.S. Department of Labor’s Wage and Hour Division (“WHD”) exposed willful violations of the FLSA at the Osaka restaurants in Philadelphia and Lansdale, Pennsylvania.

According to the Department of Labor, WHD investigators determined that from at least September 1, 2013, the employers deducted and pocketed 15 percent of customer tips charged on credit cards, well in excess of the 4 percent fee charged by credit card processors.

The employers also failed to notify tipped employees, including servers, bartenders, bussers, and hosts, that the restaurants were claiming a portion of their customer tips as a credit toward the minimum wage, which is required under the FLSA. Because the employers claimed the tips as a “credit” for the difference between the employees’ actual hourly wages and the $7.25 full minimum wage, these actions meant that the employers failed to comply with the FLSA’s tip credit requirements and therefore violated the FLSA’s minimum wage requirement.

Additionally, according to the Department of Labor, the employers violated the FLSA’s overtime provisions since at least September 1, 2013. The employers failed to pay employees the proper time-and-a-half overtime premium for work beyond 40 hours per week. Hourly tipped employees received straight time for all hours worked, even when their time records clearly showed them working more than 40 hours. The employers also paid sushi chefs, hibachi chefs, kitchen cooks, and dishwashers flat daily rates ranging from $80-$150 for all hours worked, even when their time records clearly showed them working upwards of 50-60 hours per week. The company also failed to maintain records required by the FLSA.

The FLSA requires that covered, nonexempt employees be paid at least the minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records.

Source: U.S. Department of Labor

Kehoe Law Firm, P.C.