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Houlihan's franchisee pays $5M to resolve tip-pooling, overtime charges

The U.S. Department of Labor is distributing $5 million to more than 1,400 restaurant workers under an agreement struck this week with the operator of 17 franchised Houlihan’s restaurants to settle a wage and hour dispute.

The settlement resolves a lawsuit filed by the federal government three years ago. DOL had accused franchisee Arnold Runestad and his twin operating companies of violating a number of wage and hour laws, including the forced sharing of tips with back-of-house co-workers and management. Runestad operates 15 units in New Jersey through a company called A.C.E. Restaurant Group, and two in New York through a concern named A.C.E. Restaurant Group of New York.

The 2015 action also alleged that Runestad’s restaurants denied overtime to employees who worked at multiple locations for more than 40 hours per week in total. DOL asserted the staffers in fact had the same employer and should not have their overtime eligibility based on how many hours they logged at individual restaurants.

Runestad’s businesses were also accused of double-charging employers for meals consumed on-premise, and having them work off the clock, solely for tips.

Runestad and his businesses had contested the charges, saying the allegations were unfounded.

The matter was settled this week through a consent agreement, a legal maneuver that resolves a dispute without the accused party admitting guilt.

Neither Runestad nor his companies could be reached for comment.

The consent agreement, as approved on Monday, requires Runestad and his A.C.E. concerns to provide DOL with $5 million for distribution to 1,471 past or current employees of the involved restaurants.

The settlement comes as DOL is looking at reversing a prohibition on sharing servers' tips with back-of-house workers and others who are not customarily tipped. Congress recently passed a measure that would ban restaurant owners from keeping any portion of tips that are pooled for purposes of redistribution.

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