Wage Theft Lawsuits in the Restaurant Industry

Posted on: February 5, 2020 by RMS Hospitality

Wage theft has always been an issue in the service industry as restaurant workers lose millions each year because of this issue. On a greater scale, the Economic Policy Institute estimates that $15 billion is lost just to minimum wage violations each year in all sectors combined. From tip skimming to underpayment to illegal deductions, wage theft is an ongoing crisis that needs new solutions.

Tip Skimming

Tipped workers earn more than $36 billion in tips every year. For servers in the restaurant industry as well as other workers, tips make up the majority of their wages as they usually work under minimum wage. When restaurants end up illegally withhold tips, restaurant workers are the ones who suffer.

Tips belong to workers legally speaking, not the owners of the restaurant. If someone suspects tip skimming, they can bring a lawsuit against a supervisor or owner, which would put the restaurant in major legal trouble as well as reputational trouble. Having restaurant insurance in place will help to keep liabilities and costs low when it comes to legal proceedings, but avoiding this issue and other wage theft items is paramount.

Not Paying Minimum Wage

As mentioned above, more than $15 billion is lost every year due to minimum wage violations across the country. All restaurant workers must receive at least the minimum wage in their area for every hour they work. Violations with minimum wage are common in the restaurant industry, however, even in states where tipped workers make the lower end of minimum wage, federal law guarantees the full minimum wage per hour, and tips are included to make up the difference.

Withholding Mandatory Service Charges

Restaurants usually add mandatory service charges to their bill. Many customers think that service charges are a gratuity or tip for the servers, but in reality, restaurant owners may keep the charge as an additional admin fee. Mandatory service charges in some states must go to servers unless the establishment states that the fee is not a gratuity.

Unpaid Overtime

Restaurant workers can earn money through overtime pay. If a restaurant worker puts in more than 40 hours in one week, they are expected to receive time-and-a-half for overtime hours. Restaurant workers, as tipped employees, receive special protections as owners cannot calculate overtime wages with the tipped employee minimum wage. Restaurant owners cannot pay a flat rate or offer shift pay for all hours worked if it ends up violating overtime hours.

Unpaid Meal Breaks

Restaurant workers must receive a meal break if their shift covers a certain time frame. In some places where meal breaks are unpaid, employers cannot ask their employees to do any work. If they are asked to, employers must legally pay them for that time.

About RMS Hospitality Group

At RMS Hospitality Group, our expertly crafted policies are written specifically for the hospitality industry. We offer custom-tailored solutions to meet any venue’s specific needs. For more information, contact our knowledgeable experts today at (888) 359-8390.

Posted in: blog Restaurant Insurance