Iowa City restaurants to be investigated for wage theft


Ed Bornstein/The Daily Iowan A growing Iowa City skyline stands against a muggy afternoon sky on Monday, July 17, 2006. A story released Monday in Money Magazine ranked the city No. 74 on its “Best Places to Live” list out of an original pool of nearly 750.

At least a dozen restaurants and hotels in Iowa City are slated to go under investigation for wage theft violations in the near future.

Despite Johnson County’s recent minimum wage hike, the U.S. Department of Labor is still going to study the city’s compliance with the Fair Labor Standards Act. Iowa City is one of several Midwestern college towns under scrutiny for improper employee compensation dealing with overtime and minimum wage.

Madeline Cano, a community organizer with the Iowa Citizens for Community Action Fund, believes investigators are almost certain to find violations.

“They’ll uncover something in Iowa City for sure, I could almost guarantee you that,” Cano said. “It happens constantly.”

“Wage hour violations are pervasive throughout the whole state, it’s pretty bad, and the support that is available for people is slim to none,” she said.

Scott Allen, the director of public affairs for the Department of Labor, said the problem is widespread nationally.

Allen said that in 2015, the Wage and Hour division nationally conducted 28,000 investigations and found $246 million in back wages for more than 240,000 workers.

“It’s a significant issue,” he said.

A similar investigation was recently conducted in Ames, where numerous wage theft violations were found. The DOL found that seven out of the 13 businesses studied were guilty of breaking FLSA laws and collectively owed employees over $100,000 in back wages. Investigations of other Midwestern college towns reveal that wage theft is not unique to Ames.

“We did an initiative that involved the Ohio, Indiana, and Michigan hospitality industries as well,” Allen said. “We actually did find similar violations.”

Randy Luth, the acting district director of the DOL Wage and Hour office in Des Moines, said employees in the large hospitality industries of college towns are particularly vulnerable to wage theft.

“They may have a language barrier, or they simply may just be new to the workforce and they don’t understand what laws are out there to protect them,” he said. “So that’s why we’ve decided to conduct an initiative like this, specifically in Iowa City.”

Luth said the Wage and Hour Division is still deciding which establishments to look into.

“We’re going to do a handful of investigations, we’re not going to look at every place, but we’re going to target a variety of different restaurants and hotels,” he said. “We hope to influence the rates of compliance through not only our enforcement effort, but also through the education aspect and outreach.”

According to Luth, every study is different, but usually investigators begin by conducting “initial meetings,” where they tour the establishment to determine whether the employer is covered under the FLSA, interview employees, and examine a two year sample of their payroll records.

“That’s when the Wage and Hour investigator goes to the establishment, introduces themselves, and they basically ask a heck of a lot of questions,” he explained. “They’re trying to figure out what exactly that business does, and how they pay their employees.”

Common violations include an employer deducting uniform costs from employee salaries, incorrectly applying a tip pool or confiscating tips, overtime work without compensation, or misclassification of employees and not compensating for duties performed. Luth said another major violation was employers incorrectly rounding time clock hours.

“If timecards indicate that the employer is always rounding to their benefit, that would certainly present a red flag to the investigator,” he said.

If violations are found, employers are charged with owing back wages to their employees.

“If the employer would have been in compliance with the FLSA, this is what you should have paid during the investigative period,” Luth said. “You did not pay that, so these are the wages that you owe the employee during that period of time.”

Luth used to investigate Iowa City on a regular basis and said many employers take their obligation to comply with labor laws seriously.

“We’ve also found others that have not, and what we really want to do is make sure there is a level playing field for all employers,” he said.

It still isn’t official as to when local establishments can expect to be investigated.

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