A Recipe for Wage Violations

Many employers make the mistake of assuming that employees can be treated as exempt so long as they have certain job titles or are paid a salary rather than an hourly wage. That error is especially common in small businesses like restaurants. It can be an expensive mistake, as one D.C. restaurant recently learned after a federal court ruled that its former chef was entitled to approximately $450,000 in unpaid overtime wages and liquidated damages, plus attorneys’ fees.

Adan Sanchez Sanchez was employed at Malbec restaurant, an Argentinian steakhouse located in Washington, D.C., from December 2015 to August 2019. Throughout this time, Sanchez held the title of “chef” or “kitchen manager.” The restaurant also employed another individual as its general manager.

In October 2019, Sanchez sued Malbec and its owner, alleging that they failed to pay him overtime pay as required by federal and D.C. law. The restaurant responded that Sanchez was not entitled to overtime pay because, as chef, he was an exempt executive.

Federal regulations define an exempt executive employee as one:

(1) [Who is] [c]ompensated on a salary basis . . . at a rate of not less than $684* per week exclusive of board, lodging and other facilities;

(2) Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;

(3) Who customarily and regularly directs the work of two or more other employees; and

(4) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

29 C.F.R. § 541.100(a)

(*The minimum salary level has since been increased.)

After a trial, the court determined that while Sanchez was paid a salary of at least $684 per week, he could not be classified as exempt because his primary duty was not management. Although he was “in charge of the kitchen,” prepared the menu, and sometimes oversaw other employees working in the kitchen, he was neither “in charge of, nor had significant (if any) input in, hiring and firing decisions.” The court noted that “sometimes performing managerial duties is not enough to prove that management is a ‘primary duty.'”

Because Sanchez was not exempt, the court found that he was entitled to overtime pay for any workweek in which he worked more than 40 hours. Unfortunately for the restaurant, because Sanchez was treated as an exempt employee, there were no records of his work hours. Instead, at trial, witnesses for both sides had to testify about Sanchez’s hours. The court ultimately accepted Sanchez’s estimate that he typically worked 10.5 to 11 hours per day, for a total of 2,770 overtime hours, equating to overtime wages of $112,102.50. The court also found that Sanchez was entitled to treble damages under D.C. law in addition to the wages due to him under the FLSA, as well as his attorneys’ fees and costs of suit.

Lessons for Employers

Employers should assume – as the law does – that employees are by default entitled to overtime pay whenever they work more than 40 hours in a workweek. Simply paying an employee a salary or giving an employee a job title like “chef” or “manager” does not make the employee exempt if the employee’s actual job duties do not meet all of the requirements for one or more of the exemptions available under state and federal law.

It is also vital for employers to maintain records of employee work hours. In some states, like Illinois, employers are obligated to maintain records of employees’ work hours even for overtime exempt employees. Failure to maintain such records puts an employer at a severe disadvantage, as courts and administrative agencies will presume that an employee’s estimate of their work hours is accurate absent persuasive evidence to the contrary.

Finally, employers should not hesitate to check with their employment lawyers to make sure that their practices comply with the law for their jurisdiction. As this case illustrates, a quick phone call could easily save an employer years of legal headaches and tens or even hundreds of thousands of dollars in legal fees and liability.