Thursday, July 4, 2024

IHOP Franchisee Breaks Tip Pool Rules, Faces $500K+ Fine

In a recent lawsuit filed by the Department of Labor against two IHOP franchises in Illinois, it was found that the restaurants violated tip pool regulations and underpaid their employees. The investigation by the Wage and Hour Division revealed that the franchises owe 179 employees nearly $184,000 in back wages, along with an equal amount in damages. The owners of the franchises have also been hit with a civil money penalty of nearly $200,000.

The complaint details how management at these IHOP locations forced servers to surrender their tips to a shared pool, with managers keeping the tips for themselves or sharing with back of house staff, which is against federal law. In addition, employees had their hours deleted from time records if they got too close to working overtime, depriving them of their rightful pay.

Furthermore, when overtime was paid, it was calculated at the federal minimum tipped wage instead of the higher Illinois minimum wage, resulting in employees losing out on earnings. These violations of the Fair Labor Standards Act are unacceptable and have a negative impact on low-wage workers.

The Department of Labor has recovered nearly $30 million in back wages for food service workers in fiscal year 2023 alone, highlighting the widespread issue of wage theft in the industry. Employers must adhere to labor laws and ensure that their employees are paid fairly for their work.

It is essential that employers take responsibility for paying out tips and wages correctly, as failing to do so can result in significant penalties and legal consequences. The Wage and Hour Division is dedicated to enforcing labor laws and holding employers accountable for violations that harm their workers.

To prevent similar incidents from occurring in the future, it’s crucial for businesses to review and comply with tip pool regulations, ensure that employees are paid the proper minimum wage and overtime rates, and consistently maintain accurate records of hours worked. By prioritizing fair pay practices, employers can create a positive work environment and avoid costly legal disputes.

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