Recently there has been a spate of multi-million-dollar wage and hour lawsuits and an increasing number of audits by the NYS Department of Labor targeting New York City restaurants. Among the restaurants hit are Club 21 (filed March 17, 2009), the Saigon Grill (judgment in October 2009 for $4.6 million), and, most recently, Iron Chef Bobby Flay’s Bar Americain and Mesa Grill (filed January 9, 2009). On March 18, 2009 NY Labor Commissioner M. Patricia Smith announced a $2.3 million settlement with Ollie’s Noodle Shop and eight other restaurants owned by Tsu Yue Wang. This comes on the heels of the DOL’s January 2009 announcement that it would partner with community groups in its continuing effort to crackdown on wage violations.
Such announcements are symptomatic of a nationwide crackdown on an industry with significant exposure to overtime claims, due to some of the industry’s most common practices. In the food service sector, where many workers accept long hours in order to increase their earnings (which are based primarily on tips), poor recordkeeping, cash payments, failure to handle tips correctly, improper distribution of tips, tip pooling, deductions from pay for costs such as the laundering of uniforms, and various other wage and hour issues place employers at heightened risk. The laws governing eateries are often complex, and most restaurant owners are unaware of their legal obligations to pay their workers properly. Unfortunately, many restaurant owners are following follow long-established (but illegal) industry practices, which is resulting in the type of actions cited above. Today, workers are being educated as to their rights by attorneys and workers’ rights groups, and are much less hesitant than in the past to participate in claims against their employers. Until a fundamental change is made by restaurants in general, there is no reason that this wave of lawsuits and audits will subside anytime soon.