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Taco Restaurants in Michigan Ordered to Pay $823,000 for Illegal Tip Pooling

GRAND RAPIDS, Mich. — Three taco restaurants in Michigan, including one based in Grand Rapids, have been mandated to disburse approximately $823,000 in back wages and damages. This ruling follows a federal court’s determination regarding their management of an unlawful tip pooling arrangement, as reported by the U.S. Department of Labor.

The court’s decision, finalized in November, targets the owner, Jacob Hawley, alongside his three Barrio Tacos locations in Grand Rapids, East Lansing, and Traverse City. The ruling stipulates that the restaurants must compensate 177 employees, totaling $411,663 in back wages, with an additional $411,663 in damages.

Investigations revealed that employees who received tips were required to contribute portions of their earnings to managers, who would in turn distribute these funds to non-tipped staff, such as kitchen workers. Furthermore, the Department of Labor indicated that the establishments failed to comply with the federal minimum wage requirement of $7.25 per hour for tipped employees, miscalculated overtime pay based on the tip credit, and did not maintain accurate payroll documentation.

Feds: Taco shop owner owes workers backpay

Mary O’Rourke, District Director of the Wage and Hour Division, emphasized, “If an employer claims the tip credit, tips may only be shared by employees who customarily receive tips as part of their wage compensation.” This assertion underscores the legal framework surrounding tip distribution and employee compensation in tipped industries.

In response to the ruling, Jacob Hawley conveyed to News 8 that he and his legal team have sought to engage with the Department of Labor to ensure that affected workers receive their payments while maintaining the financial health of the restaurants. Hawley contended that the issue stemmed from an error in tip distribution rather than any deliberate wrongdoing on the part of his business, stating, “We took zero money from staff.”

This case serves as a reminder of the regulatory responsibilities that owners of tipped establishments must uphold in order to protect the rights of their employees and comply with labor laws.

Source
finance.yahoo.com