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A former Thip Khao employee sued the Lao restaurant for close to $200,000 this past weekend. The plaintiff, William, alleges that the restaurant paid him a flat salary that effectively denied him minimum and overtime wages. He worked preparing and cooking food for over three years, about six days a week, the complaint says. This is the second time the restaurant and owner, Seng Luangrath, have been sued for the same reason. The first was in 2016. (The restaurant declined to comment.)
Attorney Jonathan P. Tucker of DCWageLaw (PagoJusto, in Spanish), reports that more than half of his caseload for restaurant-related lawsuits are similar: workers fighting for back pay, accusing their employers of misclassifying them as exempt and paying them salaries. The plaintiffs argue that they should have been classified as nonexempt employees entitled to time-and-a-half overtime pay, as mandated federally by the Fair Labor Standards Act (FLSA) and locally by the District of Columbia Minimum Wage Act Revision Act.
The Thip Khao lawsuit may be the most recent example, but over the past two years, kitchen workers filed at least 19 similar lawsuits against D.C. restaurants in federal court alone. Additional cases exist in D.C. Superior Court.
Tucker, who commented on the issue broadly rather than on specific cases, says most defendants pay workers a salary because they find keeping track of hours and timesheets too cumbersome. A much smaller percentage of cases, he says, are more sinister in that they involve restaurants “promoting” a worker to a salaried position with a new title such as “head prep cook”—suggesting that the employee has new managerial duties, when they don’t.
Both scenarios have the same troubling consequences.
“It’s problematic because you’re not getting overtime and frequently you’re getting paid less than the D.C. minimum wage per hour,” Tucker says. Most of his clients staring down this situation are immigrants who work demanding, low-paying jobs in casual to upscale casual restaurants. “They get away with not paying the minimum wage,” says Tucker. “In my mind, that’s the real scandal.”
Wage theft was thrust into local discourse in 2018 when the debate about Initiative 77 spun on for seven months. The ballot measure sought to gradually eliminate the tipped minimum wage for “front-of-house” restaurant workers, among others. It passed in June, but the Council overturned it in October.
Having a tipped minimum wage, or “tip credit,” allows restaurants to pay workers who get tips a lower minimum wage ($3.89) with the stipulation that employers are required to make up the difference if gratuities don’t carry the worker over the standard minimum wage ($13.25). Proponents believed that if workers received the full minimum wage directly from their employer, it would make reporting and enforcing wage theft easier.
The problem with Initiative 77 was it only addressed tipped workers, while “back-of-house” employees with job titles like “cook” and “kitchen hand” report the most wage theft and tend to earn the least. These workers typically aren’t eligible for gratuities because they don’t interact directly with customers. They therefore depend on their employers to do the right thing—pay them as nonexempt workers who are entitled to the minimum wage, plus overtime for any hours worked past 40 hours per week.
Under the FLSA, an employee must pass three tests to be considered exempt from overtime pay. First, they must earn more than $23,660 a year, which comes out to $455 per week.
Second, exempt employees must be paid on a salary basis, meaning there’s some amount of guaranteed minimum pay the employee can count on in any given work week. “If you’re salaried, you would still get your salary if you miss a day because you’re sick,” Tucker explains. “There are some restaurants that will take money. Let’s say you’re paid $1,000 per week and the restaurant takes $200 off if you miss a day. The argument there is you were never truly salaried to begin with.”
The third test, known as the “duties test,” is the trickiest. Only employees involved in relatively high-level work can be considered exempt. They typically fall under three categories: professionals or creatives with specialized or advanced education, administrative workers who crunch numbers or otherwise support a business’ operations, or managerial employees who make personnel decisions. This latter group is the most relevant in restaurants.
An exempt employee should regularly supervise two or more workers; manage others as the primary duty of their position; and have genuine input into major decisions like hiring and firing. Another consideration is whether an employee is in charge of the business or a recognized division or department. Tucker believes the general manager, bar manager, and executive chef are the most likely employees to be properly classified as exempt.
“A sous chef can be properly classified as a managerial exemption, but it goes down to the work duties,” he explains. If the sous chef has a say in who gets hired, who should get a raise, and who should face disciplinary action, they could be exempt. “But if the sous chef is only cutting vegetables and preparing sauces, they’re a substitute laborer that you’re taking advantage of.” It’s about the tasks, not the title.
City Paper drew from recent cases to illustrate how these claims and calculations play out. Most civil cases settle outside of court, as neither the plaintiffs nor the defendants want to bear the risks and costs associated with a trial. Settlement figures are usually confidential, making it hard to discern a restaurants’ ultimate culpability. City Paper elected to use first names only for plaintiffs to protect them should they continue to seek work in the restaurant industry.
According to a complaint filed in federal court in March 2018, a plaintiff named Maria worked as a cook at two restaurants owned by Med Lahlou—Station 4 and Lupo Verde—from November 2009 through December 2017. She primarily worked at Station 4 and her duties consisted of preparing food and cleaning. The complaint says Maria worked between 55 and 66 hours per week. She was paid by the hour for the first seven years she worked for Lahlou, but she began receiving a flat weekly salary of $750 in August 2016, the complaint says.
City Paper calculated what Maria would have made before taxes had she been paid as a nonexempt employee during a hypothetical week in August 2016 when she worked her maximum of 66 hours per week.
At the time, the minimum wage in D.C. was $11.50. That means Maria would have earned $460 for her first 40 hours worked. For the additional 26 hours of overtime hours worked Maria would have been paid time-and-a-half, which comes out to $17.25 per hour. That’s an additional $448.50.
Combining the two, Maria would have earned $908.50 that week instead of $750—a difference of $158.50. Taking the same scenario in 2017, when the minimum wage increased to $12.50 per hour, Maria would have lost out on $237. Annually then, Maria would have been shorted anywhere between $1,625 and $12,324, depending on whether she worked 55 hours per week, 66 hours per week, or somewhere in between.
A few months before Station 4 allegedly switched Maria over to a flat salary in 2016, three similarly situated kitchen workers sued sister restaurant Lupo Verde for failing to pay overtime wages. They asked for $194,096 in damages. Maria’s complaint alleges the two events were linked.
“Defendants’ sole purpose for paying Maria a flat salary was to hide their liability for overtime wages,” it reads. “She continued to do the same work as she had when she was an hourly employee. For example, she continued to wash meats, peel vegetables, cut and chop vegetables and meats, prepare patties of ground meat and crab meat for hamburgers and crab cakes, and clean the kitchen.” Both cases appear to have settled outside of court.
Lahlou responds, “I cannot comment on any specific cases. I can, however, assure you that we have a policy of following the law and all applicable rules and regulations and take affirmative steps to ensure that happens.”
In March 2017, a kitchen worker brought a similar case in D.C. Superior Court against Woodward Table owned by Jeffrey Buben. A plaintiff named Pablo alleged that when he worked for the restaurant for five months in 2016 as a junior sous chef, Buben misclassified him as an exempt employee, thus denying him minimum and overtime wages. He prepared sauces, did inventory, cut vegetables and meats, made sandwiches, and washed dishes, according to the complaint, which also says he worked 80 hours per week except for every third week, when he worked 96 hours.
The complaint says the restaurant paid Pablo a flat weekly salary of $846.15. “When [Pablo] worked 80 hours in a workweek, defendants paid him an effective hourly rate of $10.57,” the complaint reads. “When [Pablo] worked 96 hours in a workweek, defendants paid him an effective hourly rate of $8.81.” The minimum wage at the time was $11.50 and the complaint says the restaurant didn’t pay overtime. Pablo asked Woodward Table to pay him just over $8,500 in unpaid minimum and overtime wages. The case was swiftly resolved as Pablo removed his lawsuit within a few months. Buben did not respond to requests for comment.
A federal lawsuit filed against Zentan in 2018, the former restaurant inside the Kimpton Donovan Hotel, illustrates how several of the exemption tests come into play. Remember an employee must pass all three tests to be considered exempt. A plaintiff named Joshua was a sous chef there from September 2016 through February 2017 and worked anywhere from 43 to 67 hours per week without receiving overtime.
While Joshua passes the first exemption test because his employer paid him an annual salary of $43,000 (well beyond the threshold of $23,660), the complaint makes the argument that he fails the duties test not from the managerial perspective, but from the professional angle.
It reads that Joshua does not hold a four-year culinary degree—which is to suggest that the cook is not a highly learned professional who might qualify as an exempt employee.
While Kimpton denied that Joshua was entitled to overtime compensation and argues he was paid properly in court documents, the company decided to settle, citing a desire to avoid the time and expense of continued litigation. The agreement, which was made public, shows Kimpton paid Joshua $12,500, which is just short of the $13,238.06 the complaint called for.
Tucker, whose firm represented Pablo and Maria, says these cases frequently land on his desk for three reasons: Restaurants have a lack of respect for their employees, are trying to find ways to save money, or find it hard to track hours. Attorney Keith Lively of Doyle, Barlow & Mazard PLLC agrees to some degree, though he sometimes finds himself on the other side of these lawsuits, like he did in the case Maria brought against Station 4.
“Sometimes you have a true bad actor who is trying to screw the employee,” Lively says. “But I’ve seen a lot in the context of trying to save the headaches.” He used to specialize in employment law and still takes on a couple wage cases per year. “I commiserate with employers in employee-friendly jurisdictions because there are a ton of rules and regulations that apply.” He considers D.C. such a place.
“A lot of people jump into restaurants because it’s glamorous,” Lively continues. “They think, ‘This is going to be fun!’ Then you have these huge problems dealing with regulations. It doesn’t mean you shouldn’t comply with them, but it’s a lot of work.”
He asserts that while there’s nothing wrong with paying an employee a flat salary so long as they ensure the worker is being paid more than what’s owed to them under minimum wage and overtime laws, it’s riskier.
“If you’re paying people a flat rate, you’re probably not doing timesheets,” he explains. “When the [DC] Department of Employment Services or Department of Labor come after you and you don’t have timesheets to rely on to defend yourself, employees can say whatever they want and DOL and DOES will give the benefit of the doubt to the employee if records don’t exist.”
Lively also points out that workers can ask for four times what they’re owed in lost wages. “If you owe someone $5,000 over a couple of years, all of the sudden you can owe $20,000,” he says.
Tucker contends that misclassified workers could be better protected if the government was willing to step in and raise the minimum salary requirement from a paltry $23,660 to a figure that reflects modern costs of living. That almost happened in the last year of the Obama Administration when DOL attempted to roll out a new rule in 2016 that would have increased the minimum annual salary to $47,476.
But on Aug. 31, 2017, a federal judge in Texas struck down the Obama-era salary threshold rule. The judge said the increase exceeded DOL’s authority, thus rendering it invalid. There haven’t been any changes since, which is why the federal minimum salary requirement is still $23,660.
“D.C. could make its own exemption,” Tucker says. “D.C. does that in many cases, like they do with minimum wage.” The federal minimum wage is $7.25 per hour and hasn’t budged since 2009. Meanwhile, the District has one of the highest minimum wages in the country. It’s currently $13.25 and will increase to $15 on July 1, 2020.
At-Large Councilmember Elissa Silverman chairs the Committee on Labor and Workforce Development. It would be in that committee’s purview to bring legislation forward changing the minimum salary requirement employers must pay if they’re not paying overtime wages.
Silverman was actively involved in the debate over Initiative 77 last year. Before the repeal votes were cast by most of her colleagues, Silverman offered an amended version of the bill that would have kept parts of Initiative 77 intact for “front-of-house” support staff such as bar backs and bussers. It failed.
When City Paper asked Silverman if she had considered the wage issue of restaurants misclassifying “back-of-the-house” employees as exempt as a way of skipping out on minimum and overtime wage requirements, the councilmember acknowledged this was the first time someone brought it to her attention. “If you’re a worker who is mostly doing non-managerial work, then you are entitled to overtime,” she says.
Silverman says she’s interested in how pervasive the problem is and encourages restaurant workers to come forward, noting that they’re welcome to do so anonymously. She also emphasizes that the Council has “a good partner in the attorney general.” Karl Racine recently beefed up his wage theft division.
“The restaurant industry is a very important industry that employs a lot of people, and we know that wage theft is an issue,” Silverman says. “We want to make sure workers are paid fairly and make sure we’re enforcing the current law.”