Ten Subway franchise locations in Washington were ordered to pay $218,165 in back wages, damages, and fines after the U.S. Department of Labor (DOL) found that the owners and managers unlawfully engaged in employee tip pools. The investigation conducted by the Department of Labor’s Wage and Hour Division uncovered that four Subway franchisees—Jani Enterprises Inc., Keeyarah Enterprises Inc., Kian Enterprises Inc., and Quantum Enterprises USA Inc.—were involved in illegal practices by taking tips from 100 employees. This action directly violates the Fair Labor Standards Act (FLSA), which is designed to protect workers’ rights including their entitlement to earned tips. They adjusted timesheets to avoid overtime pay, and did not aggregate hours worked across multiple locations to bypass overtime payment obligations.
This case highlights a willful violation of the Fair Labor Standards Act (FLSA), which aims to protect workers’ rights regarding minimum wage, overtime pay, recordkeeping, and youth employment. The Subway franchise owners’ actions, including taking employees’ tips and manipulating work hours, led to significant financial penalties and highlighted the need for employers to adhere to labor laws strictly.
The DOL’s actions against these Subway franchises are part of a broader effort to enforce compliance with the FLSA in the restaurant industry, which frequently sees violations related to tips, overtime, and the misuse of child labor. Other notable cases include a Mexican restaurant chain, Plaza Azteca, agreeing to pay $11.4 million in back wages and damages, and the Joe Vicari Restaurant Group, which paid $88,000 in back wages and damages for similar labor violations. Another case involved the owners of Red Mesa Restaurant and Red Mesa Cantina in Florida, who were found to have withheld tips and failed to pay minimum wage and overtime, resulting in $191,000 in back wages and damages for 89 workers.
These incidents serve as a reminder to employers in the restaurant industry and beyond to review and adjust their labor practices to avoid legal repercussions and ensure fair treatment of employees.
