South Carolina restaurants agree to pay 85 employees nearly $486,000 in back wages following US Labor Department investigations

Investigations conducted as part of ongoing enforcement initiative in South Carolina's restaurant industry

COLUMBIA, S.C. — Pancho's Inc. — doing business as Pancho's Mexican Restaurant I, II and III and Papa's and Beer Mexican Restaurant have agreed to pay 85 employees a total of $485,913 in back wages. The back wages are owed due to violations of the Fair Labor Standards Act's overtime, minimum wage and record-keeping provisions, which were uncovered at all four restaurant locations during investigations by the U.S. Department of Labor's Wage and Hour Division.

The investigations were conducted under a multiyear enforcement initiative focused on the restaurant industry in South Carolina, where widespread noncompliance with the FLSA has been found. Since the start of fiscal year 2009, the division's Columbia District Office has concluded more than 300 investigations under the initiative, resulting in more than $2.5 million in back wages recovered for more than 2,500 workers.

"We found many low-wage employees working up to 65 hours a week without any overtime compensation and receiving pay below the federal minimum wage. Unfortunately, significant labor violations like the ones we found in this case are all too common in the restaurant industry," said Michelle Garvey, director of the division's Columbia office. "We are pleased that these workers finally will be paid their rightful wages and, as demonstrated by our ongoing initiative, we will continue to investigate South Carolina restaurants to remedy violations and ensure sustained compliance with the law."

At Pancho's Mexican Restaurant I, II and III, investigators found that employees were not properly compensated for all work hours. By reviewing payroll records and conducting employee interviews, investigators determined that tip-earning employees such as servers were made to rely primarily on tips for pay and consequently earned wages that fell below $2.13 per hour in violation of the FLSA's minimum wage provision. Additionally, other employees such as kitchen staff were paid flat salaries each month — without regard to hours worked — that did not satisfy minimum wage or overtime pay requirements. The employer also failed to maintain accurate records of employees' work hours and wages. As a result, 38 employees will receive a total of $414,079 in back wages.

The Papa's and Beer Mexican Restaurant investigation revealed that the employer made impermissible deductions for uniforms and other expenses from the wages of tip-earning employees, causing their hourly wages to fall below the federal minimum wage. Additionally, other employees such as kitchen staff were paid flat salaries each month — without regard to hours worked — that did not satisfy minimum wage or overtime pay requirements. The employer also failed to record the hours worked by kitchen staff. As a result, a total of $71,834 in back wages is owed to 47 employees.

The restaurants have agreed to maintain future compliance with the FLSA by keeping accurate records of all hours worked by all employees, paying them at least the federal minimum wage, providing overtime compensation, and informing employees in advance that the tip credit will be used.

The restaurant industry employs some of the country's lowest-paid workers who, due to a lack of knowledge of the law or unwillingness to exercise their rights, are vulnerable to disparate treatment and labor violations. As in South Carolina, the Wage and Hour Division is conducting other enforcement initiatives throughout the U.S. to identify and remedy violations that are common in the restaurant industry.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 for all hours worked, plus time and one-half their regular rates for hours worked beyond 40 per week. In accordance with the FLSA, an employer of a tipped employee is required to pay at least $2.13 an hour in direct wages provided that amount plus tips received equal 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 also are required to provide employees notice of the FLSA tip credit provisions, maintain accurate time and payroll records, and comply with restrictions that apply to workers under age 18.

Accessible and searchable information on enforcement activities by the Department of Labor is available at http://ogesdw.dol.gov/search. Publicly available enforcement data are available through the free mobile application "Eat Shop Sleep," which enables consumers, employees and other members of the public to check if a hotel, restaurant or retail location has been investigated by the Wage and Hour Division and whether FLSA violations were found. The app is available at https://sites.google.com/site/eatshopsleepdol.

For more information about the FLSA and other federal labor laws, call the division's toll-free helpline at 866-4US-WAGE (487-9243) or its Columbia office at 803-765-5981. Information also is available at http://www.dol.gov/whd/.

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