US Department of Labor investigation finds California restaurant denied workers overtime, operated invalid tip pools

Under the FLSA, a tip pool becomes “unlawful” when it does any of the following:

• Lets the employer, owners, managers, or supervisors keep any part of employees’ tips, directly or through the pool (all tips are the employees’ property).
• Includes in the pool managers or supervisors, or (when a tip credit is taken and sub‑minimum cash wages are paid) employees who do not “customarily and regularly” receive tips.
• Allows the employer to retain or divert part of the pooled tips instead of fully distributing them to employees at payday.

In the Ma’s Kitchen case, the pool was unlawful because the owners kept a percentage of tips and supervisors only distributed part of the earned tips to servers, meaning the employer and supervisors were effectively keeping employees’ tips.

“Time-and-one-half” means overtime pay of at least 1.5 times an employee’s regular hourly rate for every hour worked over 40 in a workweek.

Basic steps under the FLSA:

1. Compute the regular rate: total non‑excluded pay for the week ÷ total hours worked that week.
2. For each hour over 40, pay at least 1.5 × that regular rate. (If a weekly salary already covers all straight‑time hours, the employer still owes an extra 0.5 × the regular rate for each overtime hour.)

Under the FLSA, a violation is “willful” if the employer either knew its conduct was prohibited by the law or showed reckless disregard for whether it was unlawful. Simple negligence or a good‑faith mistake is not enough; there must be knowing or reckless behavior.

For civil money penalties:

• The statute and regulations allow DOL to assess up to an inflation‑adjusted maximum per violation for repeated or willful minimum‑wage or overtime violations and for unlawfully keeping tips.
• Within those maximums, Wage and Hour Division uses factors in 29 C.F.R. § 578.4—such as the gravity of the violation, the size of the business, the employer’s history of violations, and the employer’s good faith or lack of it—to decide the specific dollar amount. In Ma’s Kitchen’s case, that assessment came to $2,985.

The Department of Labor’s news release only states that $17,311 in back wages was recovered for nine workers; it does not detail how that amount is allocated to each worker. In Wage and Hour cases generally, each worker’s share is based on the specific unpaid overtime and tips DOL calculates for that individual, but the exact breakdown for Ma’s Kitchen has not been publicly disclosed.

The Payroll Audit Independent Determination (PAID) program is a voluntary DOL Wage and Hour Division program that lets employers self‑report and resolve potential minimum‑wage, overtime, and certain FMLA violations.

Basic use by an employer:

1. Conduct an internal audit to identify potential FLSA (and covered FMLA) violations and calculate back wages owed.
2. Submit a PAID request to WHD with detailed information about the violations and calculations.
3. Work with WHD to review the findings; WHD issues a determination of back wages owed.
4. Timely pay the full back wages to affected employees as directed by WHD, in exchange for resolving those specific issues without litigation or liquidated damages for the covered period.

Workers can report suspected wage‑and‑hour violations or get help from the Wage and Hour Division by:

• Calling WHD’s toll‑free helpline: 1‑866‑4‑US‑WAGE (1‑866‑487‑9243), available in multiple languages.
• Filing a complaint (confidentially) online or by contacting a local WHD office; DOL’s complaint page explains what information to provide and how investigations work.

Immigration status does not affect a worker’s ability to file a WHD complaint.

Rafael Valles is an Assistant District Director with the U.S. Department of Labor’s Wage and Hour Division in West Covina, California. In that role, he is part of the local leadership overseeing investigations and enforcement. Assistant District Directors typically:

• Supervise Wage and Hour investigators in their district office.
• Help set investigative priorities, review case findings, and approve back‑wage and penalty calculations.
• Serve as public spokespeople for the division in that area, as he did in the Ma’s Kitchen case.