Court orders 3 West Michigan taco restaurants, or Barrio Tacos, to pay $823K in back wages and damages to 177 workers shortchanged minimum wage and overtime.
The court concluded that Barrio Tacos restaurant, which is an owner-operated illegal tip pool,
GRAND RAPIDS, MI (STL.News) A federal court has ordered the owner of three West Michigan taco restaurants to pay 177 workers a total of $823,326 after the court granted the U.S. Department of Labor’s request for summary judgment, concluding that the restaurants operated an illegal tip pool that led to violations of federal minimum wage and overtime regulations.
On November 5, 2024, the U.S. District Court for the Western District of Michigan entered summary judgment against Sparty Tacos LLC in East Lansing, TC Tacos LLC in Traverse City, and GR Tacos LLC in Grand Rapids – all operating as Barrio Tacos – and owner Jacob Hawley that required the employers to pay $411,663 in back wages and an equal amount in liquidated damages.
The judgment resolves the department’s September 7, 2023, complaint prompted by an investigation by its Wage and Hour Division that alleged Fair Labor Standards Act violations by the three restaurants and Hawley.
Specifically, the court found that Barrio Tacos and owner:
- Required tipped employees – who were paid by Barrio Tacos using the tip credit – to surrender a portion of their cash and credit card tips to managers after each shift. Managers then redistributed these tips to non-tipped employees, including kitchen staff.
- Failed to pay tipped employees the federal minimum wage of $7.25 per hour.
- Incorrectly paid tipped employees overtime based on the tip credit rate instead of the applicable minimum wage rate.
- Failed to keep accurate records of employees’ hourly rates of pay and overtime wages due.
The division previously assessed Hawley and his three restaurants $23,904 in civil money penalties for the violations associated with this case. That matter is being litigated before the department’s Office of Administrative Law Judges.
“This case shows the U.S. Department of Labor will take all necessary legal action to prevent employers from utilizing illegal tip pools,” said Regional Solicitor of Labor Christine Z. Heri in Chicago. “In this case, the court correctly concluded that the tip pool violated the FLSA and that an equal amount of liquidated damages was appropriate.”
“If an employer claims the tip credit, tips may only be shared by employees who customarily receive tips as part of their wage compensation,” explained Wage and Hour Division District Director Mary O’Rourke in Grand Rapids, Michigan. ““There are specific legal rules for how tips must be distributed, how overtime is calculated, and how minimum wage is required to be paid. Employers should verify that they are always following the law.”
