The operators of 17 East Coast Houlihan’s restaurants face federal charges of “pervasive skimming” of employees’ pay and tips for years to cover restaurant expenses.
An announcement Tuesday from the U.S. Department of Labor said the agency may recover millions in back wages, tips and damages for more than 1,400 workers. Neither the announcement nor the lawsuit specified the total dollar amount withheld from employees.
Each of the restaurants is in New Jersey or New York and is operated by a separate business under the Houlihan’s franchised brand.
The lawsuit, filed Sept. 28 in U.S. District Court in New Jersey, does not name Kansas City-based Houlihan’s Inc., whose restaurant concepts also include Bristol Seafood Grill, Devon Seafood + Steaks and J. Gilbert’s Wood-Fired Grill.
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In the lawsuit, each of the 17 businesses is named as a defendant along with two other companies that provide services to them, as well as Arnold Runestad, a New Jersey resident.
Runestad, according to the lawsuit, is president and an owner of A.C.E. Restaurant Group Inc., which provides management, bookkeeping and marketing services to the restaurants and employs managers who oversee daily operations of the restaurants. He also is identified as president and an owner of A.C.E. Restaurant of New York LLC, which provides services to the restaurants that are in New York.
Runestad, A.C.E. Restaurant Group and representatives from Houlihan’s could not be reached for comment Tuesday.
According to the lawsuit, the restaurants’ “day-to-day labor policies and practices have routinely violated” the Fair Labor Standards Act.
Specifically, it said, they required “servers and bartenders to contribute a percentage of their tips to a tip pool, but have unlawfully used this tip pool to pay wages to non-tipped employees, including custodians and kitchen workers.”
It also said they “regularly kept a portion of employees’ tips” and failed to “consistently pay overtime when their employees worked more than forty hours in a given week, did not pay employees for all hours worked, and routinely deducted money from employees’ paychecks to cover the cost of ‘meals’ while still charging employees for those meals.”
The restaurants failed to pay overtime to employees who worked more than 40 hours in a week by working in more than one of the restaurants, the lawsuit said. Some employees also worked “off the clock,” it said, meaning they were not paid by the restaurants.
The Houlihan’s chain consists of nearly 100 restaurants in the Midwest and East.