In a significant legal development, the U.S. District Court for the Northern District of California has issued a groundbreaking order, mandating the owners and operators of 14 Bay Area restaurants to pay nearly $1 million in back wages and damages. The court’s decision came in response to extensive labor law violations found by federal investigators, including directing minors to use dangerous equipment, assigning them to work beyond legally permitted hours, bouncing paychecks, and unlawfully retaining tips meant for employees.
Extensive Labor Law Violations Found Throughout 14 Restaurant Franchise Locations
Two people who held franchise agreements with franchisor and operator to run the restaurants in several locations, were the subjects of the investigation.
The violations included the dangerous practice of directing children as young as 14 and 15 to operate hazardous equipment and work hours not allowed by law. Additionally, the owners’ businesses failed to pay employees their wages regularly and frequently issued bad checks. Moreover, they unlawfully kept tips that were intended for their hardworking staff.
In a rare and significant move, the court’s order stipulates that the owners must either sell or shut down their businesses by November 27, 2023. This decision was insisted upon by the Department of Labor as a means to resolve the case.
The Investigation
Further misconduct was also revealed, such as employers interfering with the division’s review by coercing employees not to cooperate and threatening children who attempted to voice their concerns or exercise their legal rights. An associate was also found to have played a role in these violations, including threatening an employee who complained about receiving a bounced payroll check.
To address these serious violations, the Department of Labor obtained a preliminary court injunction on May 19, 2023, which prohibited the employers from violating child labor laws, threatening and retaliating against workers, and obstructing a federal investigation.
On September 27, 2023, the department secured a consent judgment and permanent injunction, compelling the owners to pay 184 workers $475,000 in minimum wage, overtime, and tips, along with an equivalent amount in liquidated damages. In addition, the court ordered them to pay $150,000 in penalties. Furthermore, the owners are to pay $12,000 in punitive damages for their retaliatory actions.
Wage and Hour Regional Administrator Ruben Rosalez in San Francisco commended the courage of young individuals who stood up against exploitation and intimidation, leading to the Department of Labor and a federal court holding these business owners accountable. The Department’s Office of the Solicitor, in conjunction with Wage and Hour Division investigators, worked relentlessly to bring these employers to justice for endangering the safety and well-being of children and violating federal law.
Despite the ongoing litigation and a preliminary injunction, in June 2023 that they were aware of the Department of Labor’s legal action but allowed them to continue operating their restaurant franchises.
Regional Solicitor of Labor Marc Pilotin in San Francisco emphasized the significant consequences faced by employers who disregard their workers’ safety, dignity, and rights. This case sends a resounding message to others engaged in wage theft and illegal practices that the Department of Labor will employ every available tool to put an end to their misconduct.
Conclusion
The case of the 14 Bay Area restaurant franchise locations highlights the severe repercussions of violating labor laws, especially when endangering the safety and well-being of workers and children. Small and midsize business owners should recognize that disregarding labor laws can result in significant financial and legal consequences. Prioritizing compliance with employment regulations and respecting the rights of employees is a fundamental obligation that businesses must uphold to maintain their integrity and reputation.