In a landmark decision, a federal court has ruled that Jacob Hawley, the owner of three taco restaurants in West Michigan, must pay nearly $823,326 to 177 employees.
This ruling came after the court granted the U.S. Department of Labor’s request for summary judgment, which revealed that the restaurants had been involved in illegal tip pooling practices that violated federal minimum wage and overtime regulations.
Ruling Against Sparty Tacos LLC and Related Establishments
On November 5, 2024, the U.S. District Court for the Western District of Michigan made a decisive judgment against Hawley’s establishments—Sparty Tacos LLC in East Lansing, TC Tacos LLC in Traverse City, and GR Tacos LLC in Grand Rapids, all of which operate under the name Barrio Tacos.
The court directed these businesses to issue payments totaling $411,663 for back wages, alongside an equal amount in liquidated damages.
Violations Identified by the Court
This ruling stemmed from a complaint filed by the Department of Labor on September 7, 2023, following an investigation by the Wage and Hour Division, which uncovered violations of the Fair Labor Standards Act at the three restaurants owned by Hawley.
- Compelling tipped employees—who receive wages partially from tips—to surrender a share of their cash and credit card tips to managers at the end of each shift.
The managers then redistributed these tips to non-tipped employees, such as kitchen staff.
- Failing to pay tipped employees the federal minimum wage of $7.25 per hour.
- Miscalculating overtime pay for tipped employees by relying on a lower tip credit rate instead of the mandated minimum wage.
- Neglecting to keep accurate records of employee pay rates and overtime hours.
Implications of the Court’s Decision
Earlier, the Wage and Hour Division had recognized these violations, resulting in civil penalties of $23,904 against Hawley and his restaurants.
This matter is still pending litigation within the Office of Administrative Law Judges at the Department of Labor.
The implications of the court’s decision are significant, emphasizing the importance of fair labor practices and the necessity of compliance with wage laws in the restaurant industry.
As the case unfolds, it serves as a cautionary tale for similar establishments across the nation.
Source: Insurancejournal
