Court orders two Minnesota restaurants to pay $435k in back wages following US Department of Labor investigation

MINNEAPOLIS – Imagine being on your feet 60 hours a week serving customers but getting paid for just 30, or working more than 10 hours a day as a cook or dishwasher for a flat salary and being denied minimum wage and overtime protections because your employer wrongly classified you as an independent contractor and not as an employee.

An investigation by the U.S. Department of Labor’s Wage and Hour Division and subsequent federal court judgement has addressed these inequities for 36 workers at Rancho Loco Grill and Bar in Red Wing and Rancho Loco Mexican Grill and Bar in Cannon Falls. Investigators determined most workers received only about half the pay they had earned.

In a consent judgment entered in U.S. District Court in Minneapolis, owners Ramon Ruelas, Jorge Arcos, Nancy Arcos and Medardo Arcos were ordered to pay a total of $435,785 in unpaid overtime and minimum wages as well as interest, and agreed to comply with the Fair Labor Standards Act in the future.

“Our investigation found this employer broke the law deliberately. Employers who misclassify employees as independent contractors cheat those workers out of wages and deny them other workplace protections,” said Wage and Hour Division Assistant District Director Kristin Tout in Minneapolis. “Restaurant employees are among the nation’s lowest paid essential workers and they are often unaware of their rights to minimum wage and overtime. The U.S. Department of Labor is committed to using every enforcement tool available, including litigation, to ensure they are paid every penny they have legally earned for their hard work.”

The division found the restaurant paid servers and other front-of-the-house workers for 60 hours biweekly, regardless of the number of hours they actually worked. The employer also frequently required servers to report early for prep work but only allowed them to “punch in” when the first customer arrived. These practices led to the employer paying for far fewer hours than employees worked, triggering minimum wage violations.

By misclassifying cooks and dishwashers as independent contractors instead of employees, and paying them a flat rate without regard to the number of hours they worked, Ruelas and the Arcoses denied workers legally required overtime when they worked more than 40 hours in a workweek. The restaurants also failed to maintain accurate records of employee wages and the number of hours employees worked.

For more information about the FLSA and other laws enforced by the Wage and Hour Division, contact the division’s toll-free helpline at 866-4US-WAGE (487-9243). Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division.

U.S. District Court of Minnesota: Martin J. Walsh, Secretary of Labor v. Ramejo LLC d/b/a Rancho Loco Mexican Grill & Bar, Fiesta Red Wing LLC d/b/a Rancho Loco Grill & Bar, Ramon Ruelas, Medardo Arcos, Jorge Arcos, Nancy Arcos.

Civil Action No.: 21-cv-1171: