The U.S. Labor Department said Roy’s Holdings Inc., parent company of Roy’s restaurants, underpaid hundreds of Hawaii employees and unlawfully required servers to pay a portion of their tips to nontipped kitchen staff and other employees.
Roy’s agreed to pay $225,000 in back pay and tips to 326 employees covering a two-year period from roughly 2011 to 2013.
Michael Lam, an attorney representing Roy’s, said the company, while fully cooperating with the investigation, did not acknowledge any wrongdoing, but paid the wages and tips to benefit the employees.
"It’s important that people realize that Roy (Yamaguchi, chef-owner) was concerned about this, not because of the negative implications, but he wanted to make sure his employees were (taken care of) as quickly and fully as possible," Lam said.
The Labor Department said in a statement that the company’s six Hawaii restaurants reduced the pay of tipped employees below the minimum wage of $7.25 an hour, without allowing them to fully retain their tips. The Labor Department also said Roy’s unlawfully required servers to pay a portion of their tips to nontipped kitchen staff who were already paid at least minimum wage, in violation of the Fair Labor Standards Act.
"Employers cannot take a credit against (or lower) their minimum wage obligation to tipped staff if they require a portion of those tips to be shared with traditionally nontipped staff such as kitchen employees," said Terence Trotter, the division’s district director in Hawaii.
State Sen. Clayton Hee (D, Heeia-Laie-Waialua) said the enforcement by the U.S. Department of Labor of the Hawaii minimum wage will send a strong message to employers to be sure that all employees including the tipped workers are compensated according to the strict reading of the law.
The state Legislature this session passed a bill, introduced by Hee, to increase the minimum wage incrementally to $10.10 by Jan. 1, 2018. Gov. Neil Abercrombie is expected to sign the bill into law.
State law allows employers to take a 25-cent-an-hour tip credit and pay tipped workers $7 an hour.
"There is no written policy that says you as a server have to give X percent of tips" to other employees, Lam said. The practice is part of the employee culture at Roy’s and is voluntary, he said.
Immediately upon notice of violation, Roy’s stopped taking the tip credit and ensured that all tipped employees making $7 an hour were paid $7.25, Lam said.
"It is a complicated formula and a complicated interpretation, so the best scenario was to, without admitting doing anything improper … be in compliance immediately and then deal with going retroactively (later)," Lam said.
"Any company that has to pay a quarter of a million dollars, that’s a large amount, but when it comes to making sure the employees are taken care of, it was a pretty quick decision to be made for them," Lam said.
Separately, the Labor Department fined Roy’s $1,550 for allowing a minor to load a hazardous trash compactor.
The company also did not officially contest the $1,550 penalty, though Lam said the finding was "ridiculous."
The violation relates to an employee who, as part of his job, takes out the trash from the King’s Shops location of Roy’s restaurant on Hawaii island. The trash bin contains a compactor to which Roy’s does not have a key, and it was not turned on at the time the employee emptied the trash, Lam said. The employee was not placed in harm’s way, he said.
Operating a restaurant is unlike many other businesses, said Roger Morey, executive director of the Hawaii Restaurant Association.
"A vast, vast majority don’t understand that restaurant owners and managers have to work under two sets of laws," both state and federal, and "one is not always consistent with the other," Morey said.
He praised Yamaguchi’s track record of elevating Hawaii’s restaurant industry by encouraging use of locally farmed products and helping Hawaii’s economy by "promoting the islands as a nice place to visit."
"He’s a straight shooter, a good man," Morey said.
