US Labor Department recovers more than $219,000 in back wages and liquidated damages for 44 misclassified Boston-area restaurant employees

Labor contractor held in contempt of court for failing to cooperate with investigators

BOSTON — The U.S. Department of Labor has recovered $219,390 in back wages and liquidated damages for 44 Boston-area restaurant employees. Investigations conducted by the Labor Department's Wage and Hour Division found that 1760 Society Inc., doing business as The Sherborn Inn and The Sherborn Out in Sherborn, and D'Ann's Restaurant Inc., doing business as D'Ann's in Abington, had misclassified employees and, as a result, violated the Fair Labor Standards Act by denying them proper compensation for all hours worked.

The Wage and Hour Division determined that the Sherborn restaurants and D'Ann's contracted with Operations Management Group, a staffing agency, to move many of their existing employees to OMG's payroll, resulting in the employees receiving less pay than the law requires. The restaurants set the hourly rate the employees would be paid and would report to OMG the number of hours each employee worked. Although the employees had received overtime pay when they were on the restaurants' payrolls, OMG paid them "straight time" at the rate set by the restaurants for all hours worked, including overtime hours, and failed to withhold tax deductions from their wages. New workers were also put on the OMG payroll and were likewise paid improperly.

The misclassification of employees as independent contractors is an alarming trend, particularly in industries that employ many low-wage workers and in which the Wage and Hour Division historically has found significant wage violations, such as the restaurant industry.

"The Wage and Hour Division wants to send a strong message that employers cannot evade their responsibility under the law by using staffing agencies or labor contractors," said Nancy J. Leppink, acting administrator of the Wage and Hour Division. "These business practices are not a legal way to reduce labor costs."

Sherborn and D'Ann's have agreed to put the employees back on their payrolls, and to pay them the back wages and an equal amount in liquidated damages that they are owed under the FLSA. The Sherborn Inn agreed to pay $36,202 in back wages and an equal amount in liquidated damages for a total of $72,404 to 28 employees. D'Ann's agreed to pay $73,493 in back wages and an equal amount in liquidated damages for a total of $146,986 to 16 employees.

"Misclassification is a serious threat to both workers and employers who obey the law and are undercut when others use illegal practices," said George Ference, the Wage and Hour Division's northeast regional administrator. "Employers who work hard to comply with the law should not be placed at a competitive disadvantage by those who don't. Requiring the payment of liquidated damages in addition to the back wages owed should help level the playing field for those restaurant owners in the Boston area who play by the rules."

The FLSA provides that employers who violate the law are, as a general rule, liable to employees for their back wages and an equal amount in liquidated damages. Liquidated damages are paid directly to the affected employees.

In addressing the trend of misclassification, the Wage and Hour Division plans to coordinate with relevant state agencies responsible for enforcing state laws that address such violations and may also refer these types of cases to the Internal Revenue Service.

During the course of these investigations, OMG refused to cooperate with authorities from the Wage and Hour Division's Boston District Office and denied them access to time and payroll records. The Labor Department served OMG with an administrative subpoena to compel disclosure of all records necessary to complete the federal investigation. The U.S. Court of Appeals for the First Circuit confirmed the validity of the secretary of labor's subpoena authority, and held OMG and its owner, Adilso Bosi, in contempt of court for failing to cooperate with the investigation. OMG and Bosi are incurring a $1,000 fine for each day they remain in contempt of the court's order.

For more information on the FLSA and other federal laws enforced by the Wage and Hour Division, call the division's toll-free helpline at 866-4US-WAGE (487-9243) or visit http://www.dol.gov/whd.