Businesses of all sizes have struggled to make ends meet during the COVID-19 pandemic and the ensuing financial downturn. This has caused some employers to modify their pay structures and employees’ hours of work to stay solvent. However, a recent lawsuit against a popular local restaurant reinforces the importance of ensuring these changes adhere to the Fair Labor Standards Act (FLSA), despite the pressures of the COVID-19 pandemic.
In June, a former bartender filed a class action lawsuit against Local Cantina alleging violations of the FLSA. These claims included failure to pay minimum wage and failure to pay overtime. The Plaintiff alleges that soon after the COVID-19 pandemic began, Local Cantina required bartenders and servers to agree to receive a $1,000 salary in lieu of receiving an hourly rate and any tips from customers. The Plaintiff also alleged that the restaurant increased the required hours of work from around 40 hours to 45-50 hours per week without additional compensation. While the lawsuit is still ongoing, Local Cantina posted a letter to its website defending the payment system as a way to re-open its restaurants while also fairly compensating employees. Local Cantina also states the $1,000 salary was higher than the amount the majority of employees normally made in a week.
The Local Cantina lawsuit provides a reminder of the importance of always complying with the FLSA, regardless of whether a different structure may ultimately benefit employees financially. The FLSA requires almost all non-exempt employees to be paid overtime for hours worked over forty hours per week at a rate not less than one and one-half times the regular rate at which they are employed. The FLSA also requires that all non-exempt employees receive at least minimum wage for all hours worked at or below the forty hour threshold.
Paying an employee a set salary is not enough to make the employee exempt from overtime requirements; the employee must also meet the elements of one of the duties tests (e.g. administrative, executive, professional, etc.). The employee must also receive a salary of $35,568 per year or more. Mistakenly applying an exemption to a group of employees and failure to adjust salaries to the new threshold are two of the most common sources of liability for employers. As such, it is recommended that employers periodically review their job positions, hours worked and pay structures to ensure compliance with the FLSA.
The attorneys at Fishel Downey Albrecht & Riepenhoff, LLP regularly assist employers with FLSA compliance and related lawsuits. If you have any questions about this or any other matter, please contact us at info@fisheldowney.com or call 614-221-1216.