The restaurants, both operating as Osaka, have agreed to a consent judgement ordering them to pay $935,000 (£723,507.67) in back pay and liquidated damages to 201 employees, as well as a $65,000 (£50,297.32) civil money penalty.
The fine is the result of an investigation conducted by the Wage and Hour Division (WHD), part of the US Department of Labor. This found that the restaurants, situated in Philadelphia and Lansdale, have violated minimum wage and overtime regulations of the Fair Labor Standards Act (FLSA).
The investigation found that from at least 1 September 2013, the employers deducted and kept 15% of customer tips charged on credit cards; this is in excess of the 4% fee charged by credit card processors. Furthermore, the restaurants did not notify the tipped employees, including servers, bartenders, bussers and hosts, that a portion of customer tips were being claimed as a credit towards the minimum wage; this violates FLSA regulations.
The restaurants violated minimum wage requirements by claiming the tips as a credit for the difference between employees’ hourly wages and the $7.25 (£5.61) minimum wage.
The investigation further concluded that Osaka violated overtime regulations from September 2013. The restaurants failed to pay staff the correct overtime premium for work completed beyond 40 hours a week. They also paid employees, such as sushi chefs, hibachi chefs, kitchen cooks and dishwashers, flat daily rates, ranging between $80 (£61.90) and $150 (£116.07), regardless of the number of hours worked. Some of these employees were recorded as performing 50 to 60 hour working weeks.
Osaka also failed to maintain records, which are required under the FLSA.
The FLSA requires that non-exempt employees are paid at least the minimum wage of $7.25 (£5.61) an hour for all hours worked, plus time and a half their regular rate of pay, including commissions, bonuses and incentive pay, for all hours worked beyond 40 hours a week. Employers are also required to maintain accurate time and payroll records.
Osaka and its owner agreed to the consent judgment, and the $1 million settlement, midway through the first day of a week-long bench trial. The judgment, which needs to be approved by the US District Court for the Eastern District of Pennsylvania, permanently enjoins the employers from violating the FLSA in the future.
Oscar L Hampton III, regional solicitor, Philadelphia, said: “Tip credit and overtime violations are, unfortunately, common in the restaurant industry. This enforcement action and settlement helps to ensure employees are paid at least the federal minimum wage and their lawfully earned overtime pay and also that all employers in the restaurant industry can operate on a level playing field.”
Jim Cain, district director, Philadelphia at the WHD, added: “Employees must be paid the wages they have legally earned. The Wage and Hour Division works to ensure that employees are aware of their rights and helps employers come into compliance with the law.”