U.S. Labor Dept. checks LI restaurants for wage violations

The U.S. Department of Labor is targeting Long Island's largest private-sector employer, the restaurant industry, charging it with widespread minimum-wage and overtime violations.

The department has launched a campaign of random inspections with growing impact: In the 12 months through Sept. 30, it obtained court orders against 89 employers for such violations on the Island -- about half of the roughly 180 orders obtained in all the United States by the Wage and Hour Division of the Department of Labor, according to Irv Miljoner, the Westbury-based district director for Long Island. Of the Island employers being sanctioned, 66 are restaurants.

"They are cracking down and looking in every nook and cranny," said attorney Lawrence Kushnick of Kushnick Pallaci in Melville, who has represented restaurants in dealings with the Labor Department. "The attack on business has been onerous. Instead of raising taxes, the government is paying its bills on the backs of hardworking, successful business owners."

The initiative comes at a time of debate over new national and state proposals to raise the minimum wage, currently $7.25 an hour, to as much as $9. Opponents say raising the wage will lead to lower employment, and that nationally many of those earning the wage are middle-class teenagers working part time.

On Long Island, labor officials say many workers at the restaurants it has targeted are immigrants often unaware of their rights or fearful of consequences if they speak up.

In Nassau and Suffolk counties, there are 5,173 restaurants and other eating places, employing 67,542 people, according to state Labor Department data. The second-largest private-sector employer here is general-medical and surgical hospitals, which employ 55,953 people.

Officials at the local U.S. Department of Labor office say that in prior years, they relied on employee tips to launch investigations. Those probes increasingly turned up egregious violations, Miljoner said, including kitchen workers being paid as little as $2 an hour.

Claims of unfair targeting

Some lawyers representing employers complained, department officials said, that their clients were unfairly targeted -- because no businesses were paying overtime.

"We are continually told that this is how business is done," said Miljoner, "and we want to change that mindset."

So, starting in 2011, the office launched a restaurant initiative, focusing on a different segment each year. The initial focus was pizza and pasta restaurants. Last year it was diners; this year, Asian restaurants.

As part of the stepped-up litigation, local Labor officials are increasingly seeking liquidated damages, which double the back wages owed. "Before this we would just go in and we would get back wages for a two-year period, and they would pay it and we're done," said Richard Mormile, assistant director of the Long Island office. "We have upped those consequences."

The department is also obtaining more court orders instead of reaching agreements with employers out of court.

"So now you're not just promising . . . [the Labor Department] that you're going to comply," Mormile said. "Now you're promising a U.S. district judge, and if you fail to comply, now you're in contempt of his order."

Last week, Chateau Briand, a catering hall in Carle Place, agreed to pay $278,000 to settle contempt charges that it failed to pay its workers overtime and minimum wages. The employer had settled similar charges in a 2005 court order; this time around, in addition to more back wages, it had to pay $25,000 for the investigation and court costs, $23,000 in interest and it agreed to hire an independent monitor of its labor-law compliance for two years. An attorney for the caterer didn't respond to a request for comment. In a settlement, a company neither admits nor denies the charges.

The random inspections now drive as many investigations as employee complaints, Miljoner said.

In the diner initiative last year, 40 of the 41 businesses investigated had failed to pay workers overtime or minimum wage, or both, Miljoner said. The department determined that the businesses owed nearly $2 million in back wages to 478 workers. Final judgments are still pending in some of those cases.

Found in contempt

One of those businesses investigated was Metropolis Diner in Medford. A judge determined the restaurant was in contempt of a 2010 agreement because it again failed to pay workers overtime and minimum wage and forced them to give back some of the back wages they obtained under the earlier agreement. It agreed to pay nearly $68,000 to settle the contempt charges. The company's owner and lawyer both declined to comment.

Overall in fiscal year 2012, the office's investigators found that local employers, mostly restaurants and diners, owed $8.6 million in back wages, up 28 percent from $6.7 million they uncovered the year before.

This year's effort has already resulted in one of the largest settlements ever for the local office. An Asian restaurant chain with two locations on Long Island -- Asian Moon, in Garden City and Massapequa Park -- and a location in Westchester agreed to a court order requiring it to pay more than $1 million to settle charges that it underpaid 255 employees over three years and altered records to hide the violations. The department's lawsuit charged that food preparers and dishwashers worked 55 hours a week without being paid overtime.

Neither the owner nor the attorney representing the restaurant chain responded to requests for comment.

The department sees its initiative not only as a way to help employees recover back wages but also as a way to aid businesses who pay workers according to the law.

"For those businesses that want to comply we are leveling the playing field," Mormile said.

The office has 19 investigators, more than double the number four years ago. It's still a small number for investigating thousands of restaurants. But Miljoner believes size matters less with the new initiative's higher profile and consequences. "Even though we're still only investigating a small percentage of all the employers, the impact is much greater," he said.

Employer representatives are mixed about the Labor Department's efforts.

Mario Saccente, executive vice president of the Long Island chapter of the New York State Restaurant Association, said the Labor Department is overreacting.

"They feel that because of a few [violators] . . . every restaurant is doing something wrong," he said. "If you're looking for something, no matter what industry, you are going to find something." Most of the violations, he said, amount to nothing more than shoddy bookkeeping.

Lawyer: Train, don't fine

While Kushnick believes the department is right to collect back wages for employees, he believes penalties should be waived in favor of training courses: "Give them a shot to learn how to do it correctly before you put them out of business," he said.

But he has advised clients that the stiffer enforcement makes violations costly, including the increasing application of liquidated damages.

"When you do the risk analysis, it is certainly not worth . . . [it] to pay such astronomical amounts," he said.

James Green, a Westbury attorney who represents the Nassau-Suffolk Diner/Restaurant Owners Association, said the department has been flexible. "I have found them to be negotiable, but at the same time they are enforcing the law," he said.

The office also relies on outreach to educate restaurants and their representatives about what they should be doing to comply with labor laws. Officials often attend local industry meetings to speak and hand out literature. And the office holds informational sessions with lawyers and accountants who work with restaurants.

"We feel very strongly based on their feedback," Miljoner said, "that they're . . . going to try to keep their clients in compliance."