DOL Recovers $95K for Employees Denied Overtime Pay

An IHOP franchisee operating in North and South Carolina violated federal overtime rules, resulting in $95,095 in back wages, according to a recent DOL investigation.

The agency’s Wage and Hour Division found the franchisee paid 33 nonexempt employees working as cooks straight time for all hours worked, including hours over 40 in a single workweek. This amounts to a violation of the Fair Labor Standards Act’s overtime provision, the DOL said. 

The investigation also determined the employer violated recordkeeping provisions of the FLSA by falsely listing wage payments as bonuses. 

Paying straight time beyond 40 hours and labeling wages as bonuses both affect the regular rate used to calculate overtime. When required earnings are excluded or misclassified, overtime is underpaid even if total pay appears correct.

“Wage violations like these are all too common in the restaurant industry,” said Michael Gannet, Wage and Hour Division Acting District Director in Columbia, SC. He added that employers should review their pay practices and use Wage and Hour Division resources, such as its industry-specific compliance toolkits, to avoid similar violations. 

FLSA Overtime Compliance: HR Action Steps 

• Start with role classification and expectations. Confirm which positions are nonexempt and how work gets assigned. Clean up any gray areas where managers treat hourly staff like salaried, such as requiring pre-shift prep or post-shift cleanup off the clock.
• Set guardrails on time worked. Lock in policies around pre-shift prep, post-shift cleanup and side work. Require managers to capture all time worked and approve exceptions with a written reason. Watch for off-the-clock risks tied to scheduling practices. Early clock-ins, late clock-outs and automatic meal break deductions can all lead to unrecorded time if managers don’t actively monitor and correct them.
• Train the front line. Walk managers through real scenarios that trigger overtime. Put language in place that they can use in the moment so work doesn’t spill past scheduled hours without being recorded.
• Tighten documentation. Keep job descriptions, policies and acknowledgments aligned with how work actually happens. Make sure records hold up when someone asks how time gets tracked and approved.

Next Steps for Payroll

• Clean up earnings codes. Review anything labeled bonus, incentive or miscellaneous. Confirm each code feeds the regular rate correctly and doesn’t mask wages.
• Map overtime calculations. Verify the regular rate pulls in all required earnings. Catch any setup where straight time carries past 40 hours. Confirm nondiscretionary bonuses, shift differentials and other additional pay are included in the regular rate.
• Validate system outputs. Run sample pay periods for hourly roles with variable schedules. Recalculate overtime and compare results. Fix configuration gaps before the next payroll closes. Even small time tracking errors can quickly add up to overtime liability across multiple employees.
• Maintain clean records. Align time data, pay codes and payroll registers so they reconcile without gaps. Preserve an audit trail for edits and adjustments.

Where HR and Payroll Need to Sync

• Review recent pay periods. Pull those periods for any types of high-risk roles. High-risk roles typically include hourly employees with variable schedules, shift premiums or frequent pre- and post-shift work. Quantify any underpaid overtime and issue back pay if necessary.
• Assign one approver for exceptions. Route anything that touches overtime or recordkeeping to that approver before payroll runs. Close the loop with documented fixes. 
• Run regular overtime audits. Schedule quarterly spot checks on overtime calculations and time capture. Trigger an immediate review after any policy or pay code change.