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Justice News

Department of Justice
U.S. Attorney’s Office
District of New Mexico

Monday, December 9, 2013

U.S. Department of Labor Files Lawsuit Against St. James Tearoom

ALBUQUERQUE – The U.S. Department of Labor has filed a lawsuit against St. James Tearoom, Inc. and its owners, Mary Alice and Daniel Higbie, after an investigation by the Wage and Hour Division found that the defendants violated the Fair Labor Standards Act (FLSA).  The lawsuit seeks to recover unpaid minimum wages, overtime, pay and liquidation damages totaling $304,000, as well as an injunction to permanently prohibit the defendants from committing future FLSA violations.  The complaint was filed in the U.S. District Court for the District of New Mexico.

“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 division in the Southwest.  “This lawsuit demonstrates that the department is fully committed to using all enforcement tools at its disposal to ensure that workers are paid all wages due under the laws we enforce.”

Investigators from the 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 defendants’ entire tip pool arrangement invalid.  Defendants 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.

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 are litigating the case on behalf of the Labor Department.

Updated January 26, 2015