Restaurant Owners Settle California WARN Act, Wage Case for $2.6M

After nearly two years of negotiations, the California Labor Commissioner’s Office has reached a settlement agreement with the owners of a restaurant accused of wage theft and California WARN Act violations.

The owners of Kome Japanese Seafood & Buffet in Daly City have agreed to pay $2.6 million to settle the claims of 133 of its workers who said they were denied minimum wage, overtime and split-shift compensation, among other things, the commissioner’s office said in a press release issued about the agreement. The current and former employees are set to receive an average of $14,217 each.

According to a report by the San Francisco Business Times, the settlement includes a penalty payment for a violation of the California WARN Act, which occurred when the restaurant closed unexpectedly and without notice to its workers in January 2019.

Background of the California WARN Act, Unpaid Wages Case

Acting on complaints from workers who said they were denied the compensation they had earned at Kome, the labor commissioner’s office launched an investigation of the restaurant’s business and wage practices. In June 2018, the commissioner’s office announced it was assessing Kome with $5.16 million in penalties and unpaid wage charges.

Specifically, the commissioner’s office said the Kome audit revealed that 69 cooks, sushi chefs and dishwashers were paid a fixed salary and no overtime, even though they regularly worked for more than 55 hours each week. They were owed roughly $3 million in unpaid wages and penalties, the labor office said.

The restaurant’s hosts, servers and bussers were found to be owed some $1.4 million in unpaid overtime, split shift premiums and unpaid minimum wage violations incurred when the owners illegally counted their tips as part of their minimum wage pay.

Workers who earn minimum wage are entitled to a “split shift premium” when their schedule includes a split shift – one that is interrupted by non-work hours, such as covering a breakfast and dinner shift with time off in between. The split-shift premium is equal to one hour of pay at the rate of the minimum wage, according to the state’s Department of Industrial Relations.

Also, it is illegal for employers to use tips and gratuities “as direct or indirect credits against an employee’s wages,” the industrial relations department says.

Kome’s owners appealed the labor commission’s original ruling, the San Francisco Business Times report said. A hearing was held in March 2019 and the amount assessed against Kome was reduced in response to new evidence.

Settlement Details

The labor commissioner’s office revealed a detailed breakdown of the class action lawsuit settlement agreement with the owners of Kome. The current and former workers are to receive payments ranging from a low of $20 to a high $47,253. The average payment will be $14,217 per worker. Notifications had already been made to the effected employees and they were told to expect their payments to arrive beginning in August.

Also, under the terms of the settlement, the restaurant owners will pay $55,000 in civil penalties to the state.

Ongoing Efforts

According to the San Francisco Business Times report, California lawmakers and regulators have been making a concerted effort to combat wage theft and other labor law violations, including those of the California WARN act, in the last few years. Restaurants and other food service businesses have been among the most common employers involved.

The WARN Act says that an employer must provide written notice to employees and the Employment Development Department 60 days before ordering a “mass layoff, relocation or termination.”

The labor commissioner’s office also recently settled a wage violations case against the Rangoon Ruby’s and Burma Ruby restaurant chain for $4 million, the Business Times said. That case began around the same time as the Kome case in 2018.

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