EAST ST. LOUIS, IL – The U.S. Department of Labor has filed a complaint in federal court against two Illinois restaurants — operating as IHOP franchises in O’Fallon and Alton — and their owner after its investigation identified numerous violations, including management telling servers to surrender their tips to a shared tip pool when, in fact, the owner was keeping the tips for the restaurant or sharing them with back-of-the-house employees not eligible to participate in a mandatory tip pool.
In addition to violating tip pool regulations, the department’s Wage and Hour Division also learned the restaurants and owner, Khalid Ramadan skirted federal law and shortchanged employees’ wages in the followings ways:
- Directing managers to delete entire shifts from time records when workers approached 40 hours in a workweek to avoid paying overtime.
- Frequently failing to pay workers the required minimum wage.
- Paying some employees “straight time” for hours over 40 in a workweek, when overtime was required.
- Using the federal minimum tipped wage of $2.13 per hour instead of the higher Illinois minimum wage when computing servers’ overtime rate — if they paid an overtime premium at all.
Wage and Hour Division investigators determined R & R Restaurant Group Inc. and 2103 Restaurant Group LLC owe approximately $367,890 — $183,945 in back wages and an equal amount in liquidated damages – to 179 employees for the investigation period of March 1, 2020 to Feb. 28, 2022. Owned by Ramadan, the two companies operate the IHOP franchise locations.
The division also assessed a civil money penalty of $199,577 for the employers’ willful violations.
“Tips are the property of the employee who earned them and no employer has the right to them. Khalid Ramadan allegedly retained IHOP workers’ tips for his businesses — literally taking money from employees’ pockets — in clear violation of federal wage laws,” explained Wage and Hour Division District Director Noah Lee in St. Louis. “This action and several others that deprived many low-wage workers of their hard-earned earnings led us to assess nearly $200,000 in penalties given the extensive nature of wage theft our investigators found.”
To recover the back wages and damages, hold the employers accountable for their actions and prevent the companies and their owner from committing future violations, the department filed a complaint on June 11, 2024, in the U.S. District Court for the Southern District of Illinois in East St. Louis alleging numerous violations of the Fair Labor Standards Act’s minimum wage, overtime and recordkeeping provisions.
“The Department of Labor will take all necessary action to hold employers accountable for abiding by the law and ensuring workers receive the wages they have rightfully earned,” Lee added.
Founded in 1958 as the International House of Pancakes, IHOP currently has more than 1,800 locations in 50 states, two U.S. territories and 13 other countries. The IHOP franchise system is owned by Dine Brands Global Inc. in Pasadena, California. Through its subsidiaries and franchisees, the company supports and operates restaurants under the Applebee’s Neighborhood Grill + Bar, IHOP and Fuzzy’s Taco Shop brands, consisting of nearly 3,600 restaurants across 18 international markets. IHOP is not named as a defendant in the department’s lawsuit.
The FLSA prohibits employers from keeping any portion of employees’ tips for any purpose, whether directly or through a tip pool. A valid tip pool is limited to employees who customarily and regularly receive tips.
In fiscal year 2023, the Wage and Hour Division recovered more than $29.6 million in back wages for workers in the food service industry nationwide. The division’s restaurant compliance toolkit explains wage laws for employers and workers.
Learn more about the Wage and Hour Division, a search tool to use if you think you may be owed back wages collected by the division and how to file an online complaint. For confidential compliance assistance, employees and employers can call the agency’s toll-free helpline at 866-4US-WAGE (487-9243), regardless of where they are from. The division can speak with callers in more than 200 languages.
Download the agency’s new Timesheet App for iOS and Android devices – available in English and Spanish –to ensure hours and pay are accurate.
United States Department of Labor v. R&R Restaurant Group Inc., 2103 Restaurant Group LLC, Khalid Ramadan
Civil Action No. 3:24-cv-01481
