How Restaurants Can Mitigate Risk from Wage Theft Lawsuits

Wage theft lawsuits can target more subtle actions that constitute wage violations.

Restaurant owners have seen a recent surge in wage theft lawsuits. These lawsuits target payroll practices that result in employees not being paid minimum wage for all hours worked and for overtime.  Chipotle is a recent victim. As if it did not have enough problems this year, they are now facing a lawsuit for not paying their employees for all actual hours worked. Chipotle’s actions, if true, were egregious and blatant. They required employees to clock out and continue to perform their tasks. However, wage theft lawsuits can target more subtle actions that constitute wage violations.

Because of their tedious and insufferably numerous federal regulations, the FLSA and FMLA provide a favorable medium for plaintiff attorneys to ply their trade. The lure is that under these federal laws, the prevailing employee, and thus his lawyer, can receive an award for attorney fees. Such provisions are a huge incentive to file these lawsuits, particularly as nationwide class actions. Employers should be on guard for the following practices which may attract these lawsuits.

• De minimus time – The FLSA requires that an employee be paid for all work performed. An exception is for seconds or minutes that are indefinite or uncertain at the beginning or end of a work shift. However, it does not generally include identifiable time spent for the benefit of the employer such as preparatory and clean-up. An industrious employee who shows up early and turns on her computer, cleans up her work space or arranges condiments on the shelf must be paid and that time must be included in overtime calculations.
• Break time – All breaks under thirty minutes are compensable time. All breaks thirty minutes or over will be compensable time if any work is performed during that break period. An employee who jumps up during his break to help a fellow server for a few minutes must be paid for the entire break.
• Rounding time – Some employers track employee hours worked in 15 minute increments or to the nearest tenth of an hour. The FLSA allows an employer to round employee time so long as the employee is paid for all time worked. If the employer always rounds down or the employee is determined to not have been paid for all time worked overall, there could be wage violation.
• Training time – Time spent by an employee in meetings, lectures or in training, on the job or otherwise, is compensable time unless: (i) attendance is outside regular working hours; (ii) attendance is voluntary, (iii) the meeting or training course is not job related i.e. not designed to assist the employee in performing his present job, worked, and (iv) the employee does not perform work during his attendance.
• Unpermitted deductions from paychecks – Employers are often tempted to deduct items from employee wages such as uniforms, damage to company equipment, costs to replace lost employment manuals or other such sporadic expenses. However, most states have laws that prohibit deductions from paychecks other than required federal, state, and local taxes, union dues and health care premiums. Some states permit limited deductions for other purposes subject to a written agreement with the employee. Be sure to check your state’s regulations before deducting any unusual expenses.
• Withholding final paycheck – Employers are also tempted to withhold a final paycheck pending return of company property or other reasons. Be mindful that most states also have laws that require paychecks to be promptly paid by certain dates.
• Retroactive Family Medical Leave – For those employers subject to the FMLA, an employer may often not designate leave as FMLA for a multitude of reasons. It may not be aware at the time the leave qualifies or may simply forget. In some instances, the FMLA will allow retroactive designation. An employer may designate leave as FMLA leave retroactively with appropriate notice to the employee as required under FMLA regulations when the leave would qualify for FMLA protection and (i) the leave does not cause harm or injury to the employee or (ii) the employer and an employee can mutually agree that leave be retroactively designated as FMLA leave.

In today’s litigious times it is important to follow all of the FLSA and FMLA regulations to avoid being a party to one of these lawsuits. An attorney experienced in these federal employment laws can assist by conducting audits of your wage and employment practices to assure your compliance and avoid costly lawsuits.