US Department of Labor recovers $56K for 31 managers after Taco Bell franchisee misapplies overtime wage rules

NEW BERN, NC – A U.S. Department of Labor investigation has recovered $56,900 for 31 assistant general managers employed by the operator of six Taco Bell franchise locations in North Carolina who shortchanged them by incorrectly denying them overtime wages.

The Fair Labor Standards Act allows overtime pay requirements to be waived for salaried managers who meet minimum salary and other management requirements. The law states that employers may claim only up to 10 percent of bonuses, commissions or incentive pay toward the minimum salary requirement of $684 per week. The manager’s minimum salary requirement must be made up of a full 90 percent salary and no more than 10 percent bonuses and incentives received.

The department’s Wage and Hour Division determined that Taco Bell franchisee Hagan and Hagan Inc. paid the affected managers a combination of salary and nondiscretionary bonuses, incentives and commissions in violation of FLSA requirements. More than 10 percent of the manager’s salary came from bonuses, incentives and commissions. As a result, the waiver of the overtime requirement did not apply and the employer was required to make overtime payments to these managers for hours over 40 in a workweek.

In addition, investigators learned Hagan and Hagan allowed five 15-year-old employees to work outside of the hours legally allowed, in violation of federal child labor laws. The employer paid a $3,670 civil money penalty to address the child labor violations. 

“Employers who claim a minimum wage and overtime exemption must ensure that all requirements are met under the law,” said Wage and Hour Division District Office Director Richard Blaylock in Raleigh, North Carolina. “To exclude managers from federal minimum wage and overtime requirements, employers must meet the proper salary level, as well as salary basis and duties requirements for their managers. Failure to meet all these requirements could result in overtime or minimum wage violations.”

The division began its investigation at the employer’s Taco Bell location in New Bern and, after finding systemic violations of overtime regulations related to managers, expanded its review to include five other North Carolina locations in Beaufort, Havelock, James City, Morehead City and Washington.

As historic shifts in the nation’s workforce continue, employers are finding it more difficult to retain and recruit the people they need to do the jobs they offer. In December 2021, the Bureau of Labor Statistics projects that 958,000 food and accommodation services workers left their positions, and that there will be about 41,400 openings for food service managers each year, on average, from 2020 to 2030. Many of those openings are expected to result from the need to replace workers who transfer to different occupations or exit the labor force.

“As more workers choose to leave food service industry jobs, employers who demonstrate an ability to pay workers’ rightful wages have the edge when it comes to attracting and retaining workers. Those who put workers at-risk or shortchange their wages will likely find themselves without the people they need to remain successful,” Blaylock added.

In fiscal years 2020 and 2021, the Wage and Hour Division’s Southeast region found child labor violations in more than 190 food service employers investigated, resulting in more than $1 million in penalties assessed to employers.

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. The Wage and Hour Division offers confidential compliance assistance to anyone with questions about how to comply with the law, by calling the agency’s toll-free helpline at 866-4US-WAGE (487-9243). Calls can be answered in more than 200 languages.  Help ensure hours worked and pay are accurate by downloading the department’s Android Timesheet App for free.

Read this news release En Español.