The local, family-owned chain of restaurants known as Mexico Lindo Grill & Cantina is facing a lawsuit from the U.S. Department of Labor for allegedly violating the Fair Labor Standards Act of 1938. The lawsuit alleges that some of the restaurant’s employees were paid only from the tips collected from customers.
The lawsuit was filed in the U.S. District Court for the Southern District of Iowa against Rocio Correa-Mata, 33, of Iowa City. Correa-Mata is reported to have been the sole owner and primary manager of the restaurant chain since June 2015.
The Department of Labor alleges that Correa-Mata has managed and supervised the restaurant chain’s daily operations, including hiring and firing employees, creating employee work schedules, and setting pay rates. Mexico Lindo has three locations less than 15 miles away from each other in North Liberty, West Branch, and Iowa City.
The Department of Labor claims that certain employees at these restaurants were paid direct cash and credit tips from customers only—they did not receive a designated hourly wage. There are also reports of employees not getting paid the proper overtime that is still being investigated.
RELATED: Coffee Emporium’s rebranding begins a new chapter as Midnight Coffee
The lawsuit states that the chain failed to create and store accurate records of employees’ hours, workers’ full names, and Social Security numbers. The department is seeking a court order enjoining Correa-Mata and the restaurants from “continuing to withhold employees’ unpaid minimum wages and overtime compensation,” and an order finding Mexico Lindo liable for any unpaid wages and an equal amount in liquidated damages.
This lawsuit came after an investigation led by The Division of Wages and Hours. The investigation was to make sure the restaurant was abiding by the Fair Labor Standards Act. After reviewing the pay practices from Aug. 28, 2022, to Aug. 25, 2024, it was determined that the business had violated the act.
The minimum wage differs from state to state with the federal wage being set at $7.25 an hour. For tipped employees, those making over $30 in tips monthly, the federal wage drops to $2.13 as long as their tip share equates to the federal minimum wage. In Iowa, the minimum wage is the same at the federal level except for tipped employees — their minimum wage sits at $4.35.
Paul Iversen, labor educator and director at the UI Labor Center, has been educating others about labor laws for 14 years. Before that, he spent 22 years as a labor attorney in private practice, facing workplace issues head-on. The current situation at Mexico Lindo Grill & Cantina is unlike one Iversen has seen before.
“To not pay employees anything but tips is clearly illegal,” he said. “It’s uncommon that employers do this. It’s more common to see violations in tip pools…employers often try to include back-of-house staff or managers in the [tip] payout.”
Iversen said that when cases have clear violations of labor law they often settle early.
Mexico Lindo Grill & Cantina has not responded to the Daily Iowan’s request for comment and Correa-Mata is unable to be reached at the locations.