U.S. Labor Department Settles Unfair Labor Practices Lawsuit Against St. James Tearoom

ALBUQUERQUE – The U.S. Department of Labor has entered into a settlement agreement with the St. James Tearoom, Inc. and its owners, Mary Alice and Daniel Higbie, which resolves an unfair labor practices lawsuit filed in Dec. 2014.  The lawsuit alleged that St. James Tearoom and its owners violated the Fair Labor Standards Act (FLSA) by failing to pay required minimum and overtime wages to its employees. 

Under the terms of the settlement agreement, which was filed as a court order today in the U.S. District Court for the District of New Mexico, the St. James Tearoom agrees to comply with the FLSA by paying its employees the required minimum hourly rate for workweeks of 40 hours or less, and by paying its employees at a rate not less than one and one-half times the regularly rate for work in excess of 40 hours per week.  The agreement also requires that the St. James Tearoom keep accurate records of its employees, hours worked, wages paid, and other employment conditions and practices.  The St. James Tearoom also will pay $25,286.
70 in backwages for the period of Dec. 2011 through Feb. 2013, plus an additional $25,286.70 in liquidated damages for a total amount of $50,573.40, to 42 employees.  

The Labor Department’s lawsuit was filed after investigators from the Wage and Hour Division’s Albuquerque District Office found that St. James Tearoom required that its dishwashers and serving staff join a tip pool, resulting in minimum wage violations.  The mandatory tip pool included salaried managers, shift leaders, dishwashers, and other employees who are not eligible for tip pools, making the St. James Tearoom’s entire tip pool arrangement invalid.  The St. James Tearoom also failed to keep accurate records of hours worked by employees, resulting in record-keeping violations.

Under the FLSA, the employer may consider tips as part of wages, but the employer must pay at least $2.13 per hour in direct wages.  The employer who elects to use the tip credit provision must inform the employee in advance and must show that the employee receives at least the applicable minimum wage of $7.25 when direct wages and tip credit are combined.  If an employee’s tips, combined with the employer’s direct wages of at least $2.13 an hour do not equal the minimum hourly wage, the employer must make up the difference.  Employees must retain all their tips, except to the extent that they participate in a valid tip pool of sharing arrangement.

“When employers fail to pay the required minimum and overtime wages, it negatively impacts not just the workers and their families, but also other businesses and the community.   Underpaying workers gives this business an unfair competitive edge against employers who abide by the law,” said Cynthia Watson, regional administrator for the Labor Department’s Wage and Hour Division in the Southwest.  “This settlement agreement ensures that the employees of the St. James Tearoom will receive the backwages they are due and that they will continue to be properly compensated for their work.”
 

Colleen B. Nabhan of the Office of the Solicitor, U.S. Department of Labor, and Assistant U.S. Attorney Michael H. Hoses of the District of New Mexico litigated the case on behalf of the U.S. Labor Department.