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August 28, 2003
Tenn. Restaurant Workers Get $660,000 in Back Wages
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hain of Mexican restaurants in Tennessee has paid $662,286 in back wages to 236 workers as the result of an investigation by the U.S. Labor Department's Wage and Hour Division.

Workers at eight La Carreta Mexican Restaurant locations operated by Jalisco of Kingsport, Inc. will receive the back wages. Wage and Hour investigators say restaurant servers received only customers' tips and were not paid the required wage under the Fair Labor Standards Act (FLSA). The agency also said the restaurants did not pay cooks and kitchen staff the required overtime rate for hours they worked over 40 in a workweek. The company kept no personnel or payroll records during 2001 and 2002, according to the department.

"Tip credits do not replace wages," says Secretary of Labor Elaine Chao. "This company erroneously assumed servers did not have to be paid because they received tips, that all salaried employees are exempt from overtime pay requirements and that recordkeeping was unnecessary."

Since no payroll or employee time records existed, an agreement was reached to have an accounting firm calculate back wages and overtime pay based on the agency's interviews with employees. The minimum wage rate of $5.15 per hour, or the regular rate of pay if higher, was used to calculate back pay for cooks and kitchen staff and a rate of $2.13 per hour was used for servers.

The company distributed $251,688 in back wages to 82 employees who had not been paid at the appropriate minimum wage. An additional $410,598 was paid in overtime back pay to 195 employees. Some employees received compensation for both unpaid overtime and minimum wage deficiencies.

The FLSA requires employees to be paid the minimum wage of $5.15 per hour for all hours worked. Employers may consider tips as part of an employee's wages but must pay at least $2.13 an hour in direct wages. If an employer counts tips towards meeting the minimum wage obligation, employees must generally be allowed to retain their tips. Covered employees should receive time and one-half their regular rate of pay when they work more than 40 hours in a workweek. Also under the FLSA, employers are required to maintain payroll records on hours worked and wages paid.

The company operates restaurants in Kingsport, Bristol, Newport, Gatlinburg and Pigeon Forge. Another restaurant in Virginia was not included in the investigation but the company has agreed to reimburse those employees for unpaid wages and to adhere to all provisions of the FLSA at all locations.

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