Restaurant chains and wage violations

The restaurant industry is often under the microscope for wage violations. With so many tipped employees on staff, it’s easy to see why ensuring that all workers earn the minimum wage can be difficult.

While such violations tend to occur more often at large franchises based on the number of different locations they manage, smaller chains are just as susceptible to violating federal and state wage and hour laws.

A recent Bloomberg story offers an overview of wage violations in the restaurant industry. The story looks at large and small chains, both within the fast food industry as well as casual dining establishments. Here are some of the numbers presented in the story:

• DineEquity, the parent company to restaurants such as IHOP and Applebees, paid the most in back wages out of the 17 largest chains, averaging six violations and more than $1,000 in back wages per restaurant.
• Full-service restaurants made up 84 percent of the violations on the list, which shows wage violations are a bigger problem in these establishments than in fast food restaurants.
• The highest rate of abuse was found in tipped positions.
• Restaurants offering 24-hour service, such as Denny’s and IHOP, were near the top of the list for wage violations.
• Smaller chains with fewer locations were just as susceptible as larger chains. Chickie’s & Pete’s, a sports bar chain which only has 19 locations, paid out the most back wages of any restaurant chain regardless of size.

This story offers useful insights into the restaurant industry, although some, such as that most violations occur in tipped positions, are not very surprising. However, the revelation that wage and hour violations among small restaurant chains can rival even the largest national brands demonstrates that all restaurant employees and employers, regardless of the size of the company, need to be aware of potential issues related to the manner in which their employees are paid.