LOUISVILLE, Ky. (WDRB) — Two additional Louisville coffee shop chains violated U.S. labor law by allowing managers to share in tips meant for rank-and-file workers, resulting in hundreds of thousands of dollars in back-wages and damages, according to the U.S. Department of Labor.
Please & Thank You LLC and Sunergos Coffee Ltd. Co. LLC “illegally allowed managers to keep a portion of the tips earned by workers,” according to a statement Monday from the Department of Labor’s Wage and Hour Division.
The owner of Please & Thank You confirmed her business paid the penalties demanded, but she said the department's investigation seemed focused on semantics rather than a real transgression to her workers.
The investigations into Sunergos and Please & Thank You follow a similar action against Heine Bros., the biggest locally owned coffee chain, in December.
The government recovered $108,705 in back wages and damages for 55 Please & Thank You employees and $79,715 in back wages and damages for 70 Sunergos workers, according to the statement.
The department said last month that it recovered $300,000 in back-wages and damages for 492 Heine Brothers employees.
Sunergos and Please & Thank You allowed store managers to participate in tip pools, a violation of the federal Fair Labor Standards Act, according to the department.
“Federal law protects earned tips to make sure they are paid to the workers who received them for their good service,” Karen Garnett-Civils, the DOL’s Wage and Hour District Director in Louisville, said in the statement. “Employers must follow the required criteria for operating tip pools or face costly consequences.”
Representatives of Sunergos did not respond to requests for comment.
Please and Thank You owner: 'It doesn't make sense'
Brooke Vaughn, the owner of Please & Thank You, which has three stores, said it was “really disheartening” for her business to be caught up in the Department of Labor investigation because no workers were cheated out of tips.
Vaughn said three employees who had the title of “store manager” were really just the most senior baristas, and the title was meant to recognize employees who were “exceptional at their job” rather than to confer management responsibilities.
Those employees are now called “team leads,” which ensures they are still eligible to receive tips that they deserve from making drinks and serving customers, while nothing else about their jobs changed, Vaughn said.
Vaughn acknowledged that one employee who did have managerial responsibilities should not have been able to receive pooled tips, and that position is now a salaried job. But the two-year timeframe of the government audit included the pandemic, when cafes like Please & Thank You were scrambling to stay open and all employees were working frontline shifts, she said.
“We slimmed down our staff so much that everybody was doing every position. It was kind of ‘whoever shows up for work gets to do the job.’ There wasn’t a hierarchy of employees. It was a free-for-all,” she said.
Vaughn said her instinct was to dispute the Department of Labor’s findings, but doing so would have been impractical.
“It doesn’t make sense, but I signed anyway, because it was going to cost me that amount of money to fight it,” she said.
Derek Madison, assistant director of the Department of Labor's Wage and Hour Division district in Louisville, said he couldn't discuss any specific case. But federal regulations make clear which employees should be considered managers and supervisors, and running afoul of the rules can be "costly" for employers, he said.
"Those responsibilities include someone who is involved in hiring and firing, someone who is writing schedules, someone who is potentially able to discipline employees as well," he said. "Those are some of the concepts that are involved in someone who would be considered a manager."
James U. Smith, a Louisville labor attorney who typically represents employers, said the federal government under President Biden is more aggressively enforcing federal rules related to labor, especially at the National Labor Relations Board, which deals with employer-union disputes. Smith was not involved in any of the coffee shop cases.
For businesses, Wage and Hour cases are almost always more practical to settle than to litigate, he said.
Even if employers have their own understanding of who is a manager and who is not, he said, "You aren't gonna win that argument with Wage and Hour."
Those who think they may be owed back wages resulting from a Department of Labor investigation can use the agency's search tool to check.
Wage and hour violations can be reported to the labor department by calling (502) 582-5226 or 1-866-4-USWAGE (1-866-487-9243).
