TRAVERSE CITY — The U.S. Department of Labor has ordered Barrio owner, Jacob Hawley, to pay over $820,000 in back wages and damages for operating an illegal tip pool.
The investigation found that the employers required tipped employees to surrender a portion of their tips to managers, failed to pay tipped employees the federal minimum wage and incorrectly paid tipped employees overtime based on the tip credit rate.
The court ordered payment of $823,326 to 177 workers. The Wage and Hour Division’s investigation also assessed Hawley and the restaurants $23,904 in civil penalties for the uncovered violations.
The lawsuit includes business locations owned by defendant Jacob Hawley: GR Tacos LLC in Grand Rapids, Sparty Tacos in East Lansing and TC Tacos LLC in Traverse City. Hawley’s Kalamazoo’s business location was not included in the lawsuit.
“In violating the ban on unlawful tip sharing, defendants deprived their employees of lawfully earned tips, while also failing to pay their workers minimum wages and proper overtime wages,” the lawsuit reads. “Defendants also failed to keep proper records of their employee compensation.”
The lawsuit accused Jacob Hawley of unlawfully engaging in:
- Unlawful tip pooling: The defendants are accused of requiring tipped employees (e.g., servers and bartenders) to share their tips with kitchen staff, violating the FLSA’s prohibition on redistributing tips to employees who do not customarily receive them.
- Failure to pay minimum wage: Because of the invalid tip pooling, the restaurants could not claim a tip credit toward minimum wage obligations, resulting in employees being paid less than the $7.25/hour minimum wage.
- Failure to pay overtime: The defendants did not correctly calculate and pay overtime for hours worked beyond 40 hours per week. This includes improperly excluding unlawfully retained tips from calculations.
- Recordkeeping violations: The defendants failed to maintain accurate records of hours worked, wages paid, and other employment data as required by the FLSA.
Barrio first opened its doors at its Northern Michigan location in July 2021 at 305 West Front St. in Traverse City.
You can read the U.S. Department of Labor’s full lawsuit here.