As a small or midsize business owner, it is crucial to prioritize fair and ethical practices within your workplace. Violating employment laws not only jeopardizes your business’s reputation but can also result in severe penalties. A recent case involving a California restaurant sheds light on the lengths some employers will go to intimidate employees and evade their legal responsibilities.

In this article, we will explore the shocking revelations from the case, the penalties imposed by the court, and the lessons that small and midsize business owners can learn from this incident.




Asure’s HR experts help business owners comply with federal, state, and local employment laws. Learn how to protect your business here.

The Restaurant Scandal

The U.S. Department of Labor recently litigated a case against a restaurant chain in northern California. During the legal proceedings, an employee testified about a disturbing tactic employed by the restaurant to extract confessions of workplace “sins.”

Employees were offered the presence of an individual claiming to be a priest who would hear their confessions during work hours. The alleged priest asked employees about stealing from the employer, tardiness, harmful actions towards the employer, and any ill intentions they might have harbored.

Penalties and Court Order

In light of the evidence and violations discovered, the restaurant agreed to a consent judgment. U.S. District Court Judge William B. Shubb of the Eastern District of California subsequently ordered the restaurant, along with its owners and operators, to pay $140,000 in back wages and damages to 35 employees.

The violations primarily involved the denial of overtime pay, illegal payment of managers from the employee tip pool, retaliation against employees, and wrongful termination of an employee who reported the violations to the Department of Labor.

Importantly, the court imposed an additional penalty of $5,000 in civil money penalties due to the willful nature of the violations. The judge also issued a permanent order restraining the defendants from engaging in any future Fair Labor Standards Act (FLSA) violations and interfering with employees’ rights or department investigations.

Lessons for Small and Midsize Business Owners

The restuarant case highlights several crucial lessons that small and midsize business owners should take to heart:

Respect Employee Rights

Treat your employees with respect and dignity, ensuring they are aware of their rights and entitlements under employment laws. Encourage an open and supportive work environment where employees can freely express concerns or complaints.

Compliance with Overtime Laws

Familiarize yourself with the requirements of the Fair Labor Standards Act, particularly regarding overtime pay. Ensure accurate records of employee hours worked and provide appropriate compensation for overtime hours.

Proper Use of Tip Pools

Follow legal guidelines when distributing tips among employees. Avoid using tip pools inappropriately or diverting tips meant for specific employees to cover other expenses.

Prohibition of Retaliation

Understand that retaliation against employees who assert their rights or cooperate with government investigations is strictly prohibited. Any form of retaliation can lead to severe legal consequences.

Ethical Conduct

Maintain the highest standards of ethical conduct in your business operations. Engaging in deceptive practices, such as using false religious figures to manipulate employees, is not only morally wrong but also illegal.


The restaurant case serves as a stark reminder of the severe penalties and consequences that businesses may face for violating employment laws. As a responsible small or midsize business owner, it is your duty to uphold fair and lawful practices within your organization.

By prioritizing employee rights, complying with employment regulations, and fostering a transparent and respectful workplace culture, you can protect your business from legal troubles, and safeguard your reputation.

Connect with an Asure HR expert to help your business comply with federal, state, and local employment laws.

Unlock your growth potential

Talk with one of experts to explore how Asure can help you reduce administrative burdens and focus on growth.