A Pennsylvania diner was ordered to pay $1.35 million in back wages and damages to 107 employees.
The Department of Labor said Empire Diner used server tips to pay bussers' wages.
Empire Diner told USA Today it intended to appeal the decision.
A Pennsylvania diner has been ordered to pay its staff $1.35 million after it used a portion of servers' tips to pay bussers' wages in a string of labor law violations.
The Department of Labor ruled that Empire Diner, in Landsdowne, would have to pay back wages and damages to 107 servers at the restaurant.
Empire Diner would order servers to hand over 10% to 15% of their total tips to pay bussers' wages, and interfered with an ensuing investigation when it told employees to lie about the company's illegal practices, the department said.
The department also found the diner breached the Fair Labor Standards Act by violating minimum wage, overtime and record-keeping provisions, which also included illegal overtime practices.
"Tipped workers in the food services industry rely on their hard-earned tips to make ends meet. By diverting a portion of these tips, restaurant employers violate federal labor laws and harm workers and their families," said principal deputy wage and hour administrator Jessica Looman.
The fine, imposed on owner Ihsan Gunaydin and manager Engin Gunaydin, included $675,626 in back wages and an equivalent amount in damages. The restaurant will also have to pay a $47,620 civil penalty due to the "willful nature" of the violations.
Empire Diner told Insider in an email that it had filed an appeal of the judgment. The business said it had experienced "unintentional difficulties with recordkeeping and notice requirements, which we didn't know about until a 2018 audit."
"In no instance were employees paid less than minimum wage in salary plus tips nor were any employees' tips ever retained by the Diner or otherwise tampered with by the Diner or anyone in management. We believe that, when all of the evidence is considered, the judgment against us will be reversed," it stated.
The Department of Labor argued that such practices could harm a restaurant's reputation, particularly in a tight labor market where demand for staff is outpacing supply.
"Retaining and recruiting workers becomes much more difficult in today's changing job market where workers have choices about where and for whom they work," Looman said.
"Employers who take advantage of workers by violating their legal rights will find it increasingly difficult to recruit and retain the people they need to fill jobs and stay in business."
This week, a Texas BBQ restaurant was ordered to pay $230,000 to workers after their tips were shared with managers.
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