Highlighting the importance of obeying federal labor law and the dire cost of committing FLSA Violations. Read on to find out what can happen when a business operates outside the law — and how the situation could have been handled differently for a more positive outcome.
El Tequila Draws Hefty Fines for Overtime Violations
A Tulsa restaurant owner accused of cheating hundreds of employees and lying to federal investigators paid a huge price in court, highlighting exactly what NOT to do when the Department of Labor (DOL) comes knocking.
Carlos Aguirre, owner of the El Tequila restaurant chain, received a stunning $2.1 million judgment in federal court for willfully violating the Fair Labor Standards Act (FLSA) regarding specific overtime, minimum wage and recordkeeping requirements. Aguirre admitted to falsifying payroll records so he wouldn’t have to pay overtime.
Restaurant Deceives Investigator to Conceal Overtime Violations
This story began when an employee of the El Tequila restaurant chain filed a complaint with the DOL claiming the restaurant was regularly cheating employees out of overtime pay.
The DOL dispatched a Wage and Hour Division (WHD) investigator to check it out. But the only violations the investigator found were some technical recordkeeping glitches. The restaurant’s payroll records appeared to be fine, and none of the employees on site complained.
But everything wasn’t fine. In fact, the restaurant owner was secretly keeping two sets of books. So when another employee from a different location filed a similar complaint about back pay, the investigator made a surprise visit.
That’s when the investigator discovered the payroll records had been doctored and that employees had been coached to lie. In reality, the restaurant owed its workers a whopping $260,000 in back pay.
The investigator visited a different site and found similar overtime violations. This time, El Tequila owed $380,000 in unpaid wages, bringing the total unpaid wages to $640,000.
And it just got worse: even though the restaurant chain made changes to ensure more accurate time clock records, Aguirre continued to cheat the system and eventually got caught.
Aguirre admitted to submitting false time sheets that overrode the cash register’s clock-in system. As a result, the WHD investigator calculated an additional $636,483 in back wages. The overall total was so high the DOL filed suit against the restaurant chain in federal court.
Ultimately, a federal judge ordered El Tequila to pay a hefty $2.1 million in back wages and damages to more than 300 employees.
How El Tequila Made a Bad Situation Worse
Always remember, honesty is the best policy and, if you willfully violate the law, the noncompliance penalties are even harsher.
Aguirre learned the hard way because a judge determined his deception was willful, which extended the statute of limitations from two to three years. This extension allowed employees to collect unpaid wages for a longer period, resulting in a higher judgment.
Falsifying documents, lying and withholding information from federal investigators made El Tequila’s cover-up costlier in the end.
What El Tequila Should Have Done Differently
Complying with federal labor law — along with keeping accurate records — is essential if you want to avoid FLSA penalties. Mistakes happen, and if you make one, don’t try to cover it up. As the El Tequila example proves, the problem only gets worse. If your business is the target of a labor law investigation, use common sense:
- Cooperate
- Be truthful
- Provide all requested documentation
El Tequila should have cooperated with the WHD investigator, even if it meant turning over payroll records that showed wrongdoing. The restaurant would have been penalized for overtime violations but not for willful deception. Unfortunately, the restaurant chain got penalized for cheating employees and then willfully covering it up, extending the window for collecting damages.
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