A federal court has mandated that the owner of three West Michigan taco restaurants pay $823,326 to 177 workers. This decision follows a summary judgment in favor of the U.S. Department of Labor, which found that the restaurants were operating an illegal tip pool, violating federal minimum wage and overtime laws.
On November 5, 2024, the U.S. District Court for the Western District of Michigan ruled against Sparty Tacos LLC in East Lansing, TC Tacos LLC in Traverse City, GR Tacos LLC in Grand Rapids—collectively known as Barrio Tacos—and their owner Jacob Hawley. The court ordered them to pay $411,663 in back wages and an equal amount in liquidated damages.
The ruling addresses a complaint filed by the department on September 7, 2023. An investigation by its Wage and Hour Division alleged violations of the Fair Labor Standards Act by these establishments and Hawley.
The court determined that these employers required tipped employees to give part of their cash and credit card tips to managers after each shift. These tips were then distributed to non-tipped staff like kitchen workers. Additionally, they failed to pay tipped employees the federal minimum wage of $7.25 per hour and incorrectly calculated overtime based on a tip credit rate rather than the applicable minimum wage rate. They also did not maintain accurate records of hourly rates and overtime wages due.
Previously, Hawley and his restaurants faced civil money penalties totaling $23,904 for related violations; this issue is still under litigation with 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,” stated 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.”
Mary O’Rourke, Wage and Hour Division District Director in Grand Rapids, emphasized: “If an employer claims the tip credit, tips may only be shared by employees who customarily receive tips as part of their wage compensation.” She added that there are specific rules regarding how tips should be distributed and how overtime is calculated.
Haley Jenkins and Aaron Wenzloff represented the department’s Office of the Solicitor in this case.
For more information about compliance resources for restaurant workers or if you believe you might be owed back wages collected by the division, visit their website or call their helpline at 866-4US-WAGE (487-9243). The division offers assistance in over 200 languages.
The agency also provides a Timesheet App available for iOS and Android devices to help ensure hours worked are accurately recorded.
