In a recent investigation conducted by the U.S. Department of Labor (DOL), ten Subway franchise locations in Washington were found guilty of participating in employee tip pools and manipulating timesheets to avoid paying overtime. The franchisees, namely Jani Enterprises Inc., Keeyarah Enterprises Inc., Kian Enterprises Inc., and Quantum Enterprises USA Inc., were ordered to pay a total of $218,165 in back pay, damages, and fines.
(Image Credit: subway)
The DOL’s Wage and Hour Division (WHD) discovered that the franchisees had been unlawfully taking tips from approximately 100 employees, which were left through credit card payments. They also adjusted timesheets to ensure that the hours worked by their employees remained below 40 hours per week, thus avoiding the legal obligation to pay overtime rates. Additionally, the franchisees failed to combine hours worked at multiple locations under common ownership, further evading their responsibility to pay overtime.
“This Subway owners and managers willfully violated the Fair Labor Standards Act by underpaying employees and pocketing tips that did not belong to them,” stated Thomas Silva, the district director of the DOL’s Wage and Hour Division in Seattle.
The Fair Labor Standards Act (FLSA) sets crucial standards for minimum wage, overtime pay, recordkeeping, and youth employment in the United States. Violations of the FLSA, such as the ones committed by the Subway franchisees, can lead to serious consequences, including fines, back pay, and damages.
The WHD regularly investigates violations within the restaurant industry, focusing on issues such as loss of tips, overtime violations, and improper use of child labor. This recent case involving Subway franchisees is just one example of the numerous investigations conducted by the DOL to ensure compliance with labor laws.
Unfortunately, Subway franchisees are not the only ones who have faced legal action for violating labor laws. In November, Plaza Azteca, a Mexican restaurant chain, agreed to pay $11.4 million in back wages and damages to over 1,000 employees across more than 40 locations. The DOL found that Plaza Azteca had allegedly violated overtime and minimum wage requirements.
Similarly, the Joe Vicari Restaurant Group, owner of the Andiamo Italian food chains in Michigan, paid $88,000 in back wages and damages to 127 employees at 13 locations. The DOL discovered that the group had denied workers their full wages and allowed a minor to work later and longer than legally permitted.
Moreover, in March 2023, the DOL recovered $191,000 in back wages and damages for 89 workers at two commonly owned Florida restaurants, Red Mesa Restaurant and Red Mesa Cantina. These establishments were accused of withholding tips, charging employees for their uniforms, and failing to pay the minimum wage and overtime.
The cases mentioned above demonstrate the severe consequences that businesses can face when they fail to comply with labor laws. Violating the FLSA not only results in financial penalties but also damages a company’s reputation and may lead to legal action from affected employees.
It is essential for employers to review their practices and ensure they are in full compliance with labor laws to avoid costly consequences. Employers should pay their employees fair wages, accurately record working hours, and refrain from participating in illegal activities such as tip pooling for personal gain.
The Subway franchisees’ violation of labor laws by pocketing employees’ tips and manipulating timesheets is a clear example of the consequences businesses face when they disregard the Fair Labor Standards Act. The fines, back pay, and damages imposed by the DOL serve as a reminder that employers must uphold their legal obligations and treat their employees fairly.
By maintaining compliance with labor laws, businesses can avoid legal troubles, protect their reputation, and foster a positive work environment. It is crucial for employers to prioritize their employees’ rights and ensure that they are compensated appropriately for their hard work.
Remember, the Fair Labor Standards Act sets the standards for minimum wage, overtime pay, recordkeeping, and youth employment. By adhering to these regulations, employers can build trust with their employees and contribute to a fair and just work environment.
