New Back Wages Settlement: San Diego Deli to Pay $500K

A San Diego deli will pay more than $500,000 in back wages after a federal investigation found it paid workers a flat daily rate that fell short of minimum wage and overtime requirements.

Here’s what happened, according to an investigation by the U.S. Department of Labor’s Wage and Hour Division (WHD).

Flat-Rate Pay Leaves Deli Owing Workers Back Wages

The investigation determined that Chau Deli, operating as A Chau Sandwich, paid six workers a flat rate of $100 per day.

Those workers regularly worked 11-hour shifts, averaging 55 hours a week. WHD calculated the regular rate of pay based on hours worked and found that the flat $100 daily rate fell below the local minimum wage.

WHD also found the deli did not pay overtime premiums for hours worked over 40 in a workweek, a violation of the FLSA’s overtime requirements.

The investigation resulted in $500,256 in total back wages, with each of the six affected workers owed approximately $83,000.

Practical Takeaways

• Confirm whether a role is exempt or non-exempt before setting a flat-rate pay structure. Flat rates don’t remove FLSA overtime obligations for non-exempt employees.
• Audit any flat-rate or per diem pay structure against the hours employees actually work each week. Scheduled hours are not a reliable stand-in for worked hours.
• Recalculate the regular rate of pay whenever weekly hours change. Overtime liability starts the moment an employee crosses 40 hours in a workweek, regardless of how base pay is structured.
• Check pay against local minimum wage ordinances. Many cities and counties set a rate above the federal $7.25 floor, and a flat daily or weekly rate can fall under it without the employer noticing.

More info: DOL news release.