17 Houlihan's restaurants in New Jersey and New York
short workers of tips and wages, US Department of Labor alleges

NEWARK, N.J. — Citing "pervasive skimming from employees' tips and wages," the U.S. Department of Labor has sued a Saddle Brook-based company that operates Houlihan's restaurants in New Jersey and New York and their owner for violations of the minimum wage, overtime and record-keeping requirements of the Fair Labor Standards Act.

Filed in the U.S. District Court for the District of New Jersey, the lawsuit could recover millions in back wages, tips and liquidated damages on behalf of approximately 1,430 current and former Houlihan's employees. The defendants include A.C.E. Restaurant Group Inc., A.C.E. Restaurant Group of New York LLC and Arnold Runestad.

An investigation by the department's Wage and Hour Division found that the defendants engaged in a number of practices that violated the FLSA. These include the following:

• Requiring servers and bartenders to contribute a percentage of tips to a tip pool, but using the tips to pay employees for tasks, such as custodial and kitchen work. The lawsuit claims that Houlihan's regularly retained a portion of employee tips.
• Denying overtime pay to employees who worked at more than one restaurant, even when their combined hours totaled more than 40 hours in one workweek.
• Having employees work off-the-clock, earning tips for their labor.
• Routinely deducting money from employees' paychecks for meals consumed during breaks, while also requiring payment, at times, for the meals. The deductions were greater than the defendants' cost for providing the meals, and often resulted in some employees receiving less than minimum wage.

"The severity of these violations and the number of affected workers is such that restitution, we believe, could amount to millions of dollars," said Regional Solicitor of Labor Jeffrey Rogoff. "Restaurant workers are among those in our economy who are most vulnerable to wage violations, and we are committed to pursuing remedies vigorously on their behalf whenever necessary."

"The defendants' practices deprived many of their employees of money rightfully earned — money that they need to afford basics," said Wage and Hour Division Regional Administrator Mark Watson. "Reducing labor costs by shorting workers also places law-abiding restaurants at a competitive disadvantage, and violates the principle of a fair and level playing field laid out in the FLSA."

The New Jersey restaurants are located in Bayonne, Brick, Bridgewater, Cherry Hill, Eatontown, Fairfield, Hasbrouck Heights, Holmdel, Lawrenceville, Metuchen, New Brunswick, Paramus, Ramsey, Secaucus and Weehawken. The New York locations are in Farmingdale and Westbury.

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

The FLSA requires an employer of a tipped employee to pay no less than $2.13 an hour in direct wages, provided 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 at least the minimum wage, the employer must make up the difference.

Tips are the property of the employee, and the employer is prohibited from using an employee's tips for any reason other than as a credit against its minimum wage obligation to the employee (tip credit) or in furtherance of a valid tip pool among employees who customarily and regularly receive tips. A valid tip pool may not include employees who do not customarily and regularly receive tips (for example, dishwashers, cooks, chefs and janitors), and an employee cannot be required to turn over his tips to the employer. Employers also are required to maintain accurate time and payroll records.

The Wage and Hour Division's Northern and Southern New Jersey and Long Island District Offices investigated the case. Attorneys Lindsey Rothfeder and Dustin Saldarriaga of the department's regional Office of the Solicitor in New York are litigating the case.

Workers and employers can get more information about federal wage laws administered by the Wage and Hour Division by calling the agency's toll-free helpline at 866-4US-WAGE (487-9243). Workers can also file complaints confidentially. More information also is available online at http://www.dol.gov/whd/.

Perez v. A.C.E. Restaurant Group Inc., A.C.E. Restaurant Group of New York LLC, Arnold Runestad, et al Civil Action Number: Case 1:15-cv-07149-JHR-AMD