Restaurant's 'guaranteed wage' violated FLSA, 6th Cir. says
- A "guaranteed wage" arrangement devised by the owners of an Ann Arbor, Michigan, Korean-Japanese restaurant violated the Fair Labor Standards Act (FLSA), the 6th U.S. Circuit Court of Appeals has ruled (Acosta v. Min & Kim, Inc., No. 18-1190/1338, (6th Cir. March 18, 2019)).
- Employees at Seoul Garden were paid a guaranteed lump sum for six days of double shifts, according to court documents. They worked an average of 52 hours per week and were docked one-sixth of their weekly pay for each missed day, but were not compensated if they worked extra hours.
- Following an investigation, the U.S. Department of Labor sued, alleging FLSA violations. A lower court determined that the employer owed $112,212 in back pay to 28 employees but declined to award liquidated damages. On appeal, the 6th Circuit upheld the lower court's ruling, finding that by "affirmatively seeking to understand the Act's requirements and consulting with and relying on an accountant about the guaranteed wage, as well as the minimum wage and overtime laws, [the owners] acted in good faith and had reasonable grounds for believing they were in compliance with the Act."
The FLSA requires that covered employers pay employees one and one-half times their regular rate for hours worked beyond 40 in a workweek, unless an exemption applies.
In Acosta, the 6th Circuit noted that a set weekly rate can be in compliance with the FLSA, "so long as the employer pays the minimum wage and employees do not work more than 40 hours." It was the excess hours that made Seoul Garden's arrangement illegal, the court said.
Employers should note, however, that DOL is considering an update to its "regular rate" calculation. In a regulatory agenda released last year, the agency announced its intent to amend relevant FLSA regulations; it sent a proposed rule to the White House for review in January, and its review was completed March 21. If approved, details will appear in the Federal Register and the public will have an opportunity to comment.