Federal court enters consent order requiring North Conway restaurant to pay $148K in tips, wages, liquidated damages to 31 employees after Department of Labor investigation

MANCHESTER, NH – A federal court has ordered a North Conway restaurant to pay a total of $148,128 – $74,064 in tips and back wages and an equal amount in liquidated damages – after a U.S. Department of Labor investigation found the employers kept workers’ tips illegally and failed to pay them overtime wages when required by law.

Investigators with the department’s Wage and Hour Division determined that, between February 2020 and February 2022, Luchador Tacos LLC and owners Joshua Mitchell and Katherine Mitchell violated the Fair Labor Standards Act when they did the following:

• Kept employees’ credit card tips.
• Paid at least one employee straight-time wages for overtime hours worked.
• Did not pay some employees one and one-half times their regular rates of pay for hours over 40 in a workweek.
• Calculated tipped employees’ overtime rates improperly, basing the rates on their cash wage as opposed to their regular rates of pay.

In addition to recovering wages and damages, the consent judgment and order obtained by the department’s Office of the Solicitor in the U.S. District Court for the District of New Hampshire enjoins and restrains the restaurant and its owners permanently from violating the FLSA’s minimum wage, overtime and recordkeeping requirements.

The order also requires the employers to cooperate with any future investigations, prohibits them from discharging or discriminating against any employee engaged in FLSA-protected activity, such as filing a complaint with, providing information to, or cooperating with a Wage and Hour Division investigation. The restaurant and its owners must also provide current employees with basic FLSA information in English and Spanish and an overtime fact sheet in English and Spanish.

“Food services industry employers must understand that they may not keep tips earned by their employees. Illegally withholding hard-earned tips makes it harder for workers and their families to make ends meet,” said Wage and Hour District Director Steven McKinney in Manchester, New Hampshire. “Employers can avoid costly violations like those in this case by making sure their pay practices comply with federal law. We encourage employers to contact us to discuss questions they may have relative to the FLSA’s wage and tip-related requirements.”

The department published a final rule, “Tip Regulations under the Fair Labor Standards Act,” parts of which became effective April 30, 2021. Under that rule, an employer cannot keep employees’ tips under any circumstances, and managers and supervisors may not keep tips received by employees, including through tip pools. This prohibition against employers keeping tips applies even if tipped workers are paid hourly at rates equal to or above the full federal minimum wage. 

View the consent judgment and order.

In fiscal year 2021, the division recovered more than $34.7 million in back wages for 29,209 food service industry workers. The Bureau of Labor Statistics projects there were 1.2 million job openings in the accommodations and food service industry in August 2022, while 1,022,000 accommodations and food service industry workers separated from their jobs.

The FLSA requires that most employees in the U.S. be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 in a workweek.

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. Employers and workers can call the division confidentially with questions regardless of their immigration status. The department can speak with callers confidentially in more than 200 languages through the agency’s toll-free helpline at 866-4US-WAGE (487-9243).

Download the agency’s new Timesheet App, now available for Android and iOS devices, to ensure hours and pay are accurate.