pancakes

(File photo)

KALAMAZOO, MI - No, you can't charge servers to work at your restaurant.

A federal judge has ruled that two Sophia's House of Pancakes restaurants in Kalamazoo and Benton Harbor must pay $122,500 in back wages and $122,500 in damages to 73 employees at the Kalamazoo location and 45 at the Benton Harbor restaurant, according to a news release from the U.S. Department of Labor.

The violations covered are Sept. 2010 through Jan. 2012.

Investigators from the department's Wage and Hour Division found servers were required to pay $2 an hour from their tips to their employer.

Investigators also found that Peter Philis, who runs the Benton Harbor location, discriminated against a server by firing her, claiming that she reported violations of the Fair Labor Standards Act to the Labor Department.

the Department of Labor would not say if it was that woman's compliant that launched the investigation into tipping violations.

"The U.S. Department of Labor does not reveal the name of complainants," said Rhonda Burke, U.S. Department of Labor spokesperson in Chicago. "This information is protected under the government informer's privilege."

A federal judge ordered the restaurants, Sophia's LLC in Kalamazoo and Sophia's III in Benton Harbor, and their owners, John P. Filis and Peter P. Philis, to pay the employees back.

"Requiring employees to hand over part of their tips to their employer poses a serious problem to workers who, in many cases, are already struggling to get by, and also undercuts those employers that obey the law and pay their workers properly," said Mary O'Rourke, district director for the Wage and Hour Division in Grand Rapids. "Tips are the property of the workers, and must be retained by them except where a valid tip-pooling arrangement is in place that includes only tipped workers.

"We see far too many violations of this nature in the restaurant industry, where low-wage workers are particularly vulnerable to unfair labor practices. Often, their employers take advantage of them. The terms of this consent judgment should serve as a wake-up call to other restaurants attempting to short workers in this manner."

John Philis, owner of the Sophia's House of Pancakes in Kalamazoo, said in a telephone interview Tuesday afternoon: "What's there to say? Sometimes you think you are doing the right thing and it is the wrong thing according to the Department of Labor."

He said he has operated the Kalamazoo restaurant for five years.

"Personally, I think it was not fair what happened," he said. "They should explain the law for the new businesses," he said, and praised the health department for its work with restaurants to make sure that everything was in order before opening.

"With the Labor Department it is different , the law changes all the time," he said.

Investigators found the two pancake houses restaurants failed to comply with the requirements for tipped employees as well as the minimum wage, overtime, record keeping and anti-retaliation provisions by:

Requiring servers to pay the employer $2 per hour from their tips, without a tip pooling arrangement in place. A valid tip pool allows employers to collect tips as long as employees are notified of the arrangement and tips are redistributed by the employer to eligible employees in the pool and not used for any other purpose.

Failing to pay servers for time spent working before and after their scheduled shifts.

Taking deductions from employees' pay for uniforms or incorrect orders, causing their hourly rates to fall below minimum wage.

Failing to accurately record daily and weekly work hours and earnings.

Paying kitchen staff flat salaries without regard to the number of hours they worked, resulting in violations of the overtime regulations when these employees worked over 40 hours in a work week and were not paid overtime.

Discriminating against a worker whom the employers blamed for calling the Department of Labor to complain about the restaurant's pay practices.

The court action enjoins the defendants from violating the Fair Labor Standards Act in the future and requires significant changes in their business practices. The defendants are required to provide training to managers and employees on the FLSA's tip credit provisions to ensure compliance with the FLSA at both locations.

The consent judgment also requires the employer to: install a computer or point-of-service system that records hours worked and permits servers to self-report tips received; provide every current and future employee with a Wage and Hour division "Work Hours Record keeper" publication they can use to track their hours; and provide a complete wage statement to each employee each pay period, showing all hours worked, rate of pay, gross pay received, the nature and amount of all deductions, net pay, the pay period covered by the payment, and a copy of the employee's record of hours worked.

It also requires the employers to provide a copy of the Wage and Hour Division's Handy Reference Guide to the Fair Labor Standards Act to every current and future employee.

Under the FLSA, when customers tip employees, restaurant operators can benefit by claiming a credit toward their obligation to pay those employees the full minimum wage. An employer that claims this tip credit is required to pay a tipped employee only $2.13 per hour in direct wages.

If an employee's tips, when added to the wages paid directly by the employer, do not equal at least the federal minimum wage of $7.25 per hour the employer must make up the difference.

Tips are the property of the employee who receives them. The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular hourly rates for hours worked beyond 40 per week.

According to the list of Sophia's House of Pancakes employees attached to the order, some will be receiving nearly $9,000 in back wages and damages.

Nicholas Mumma, who worked briefly at the Kalamazoo restaurant in 2010, was happy to learn that he will be receiving $158.32.

"I'm pretty sure there was a time I didn't receive any of my tips," he said. "I was a server. I would basically hand over all my tips and then they would hand back my 'share' with about 30 percent taken out," he said. "It seemed like the bussers were getting paid through our (servers') tips. I put up with it because being my first experience, I just thought that's how's it goes."

Mumma said he started training in Benton Harbor. "I would drive about two hours to get there and leave with no tips," he said. "I must have been crazy."

Philis said he is working with his attorney to make sure he understands the details of requirements for tips and wages. "I told my attorney to explain to make sure we are doing the right things about the tips," he said. "We don't want no problem with nobody. We are here to go according to the law."

Difficulties with the Department of Labor regulations are discouraging to small businesses, he said. "Pretty soon," he said, "everyone will be eating breakfast at McDonalds."

Rosemary Parker is a reporter for MLive. Contact her at rparker3@mlive.com.