Wage & Hour Update: The Department of Labor Is Cracking Down!

Employers, particularly restaurateurs in the Los Angeles area, need to be aware that the Department of Labor ("DOL") is increasing its surprise worksite visits and conducting immediate and unannounced wage and hour investigations. This news comes directly from Alfred Robinson, the acting Administrator of the DOL's Wage & Hour Division.

On April 18, 2012, the Wage & Hour Division issued a press release stating that it is "launching an enforcement and education initiative focused on the restaurant industry in the Los Angeles area to ensure compliance with the Fair Labor Standards Act's minimum wage, overtime, record-keeping and child labor provisions. Under this initiative, the division will be conducting unannounced investigations at restaurants in the San Fernando Valley, Hollywood, West Hollywood, West Los Angeles and other areas of Los Angeles County."

In the past six years, the Division's Los Angeles office found that "72% of all restaurants investigated in its jurisdiction were in violation of the FLSA. Those violations resulted in $2.2 million in minimum and overtime back wages owed to more than 1,400 workers."

Should your company be subjected to an impromptu investigation, be prepared to provide time cards for all of your employees going back a minimum of four years. They may also be requesting to inspect personnel records. The DOL is going to be looking for common violations including not paying for all hours worked, having employees perform work duties "off the clock," and incorrectly designating employees as exempt from overtime. Other violations include paying nonexempt employees a flat salary regardless of any overtime hours worked, as well as paying cash wages completely "off the books," which can lead not only to employees being cheated out of proper minimum wage and overtime compensation, but also to tax liabilities.

Best practices: The take away from this news is that all employers, regardless of whether they are in the restaurant business or not, must ensure that they are properly keeping track of employees' time, including requiring that employees clock out and then back in for their meal breaks. All too often we find that employers are not keeping a record of when employees are taking their lunches. Regardless of whether your company is subject to an investigation by the DOL, if an employee sues you for failure to provide meal and rest breaks, you will lose if you are unable to document that your employees did take a meal break. The obligation is on the employer to demonstrate that they are providing hourly employees with an opportunity to take a duty-free meal break for shifts longer than five hours.

Another best practice is to take a look at salaried employees and ensure that they are properly classified as an exempt employee, (meaning, not entitled to overtime). We caution that this is a fact-based inquiry that requires that you look at all of their job duties and the amount of time that they are performing those job duties. Just because you call someone a "manager" or "supervisor", or just because you pay them a "salary", does not alone mean that the employee is exempt. In the restaurant context, only a designated restaurant manager who manages at least 51% of the time would be considered exempt. Everyone else, from servers, bartenders, hostesses or cooks, regardless of whether you call them a manager or have them conduct training, will likely be considered a non-exempt employee. Non-exempt employees must fit into one of the major recognized exemptions including: administrative, professional, executive, computer professional, or an outside salesperson.

If you have any questions about whether an employee is properly classified, we advise that you seek qualified legal counsel. For more information about the classifications