Oakland Restaurant Owes $105,000 to Former Employees for Service Charge Violations

The restaurant industry can be a hotbed for many kinds of wage theft that affect workers. An Oakland fine-dining restaurant was recently found to be on the hook for more than $105,000 after a city investigation revealed wage violations committed against former employees.

The restaurant, Hi Felicia, closed in May 2023 after being in business for just a year. Hi Felicia enjoyed popularity during its short run, even appearing on the Michelin guide for the Bay Area.

According to the San Francisco Chronicle, former workers had filed multiple wage claims against Hi Felicia with the California Department of Industrial Relations. An investigation followed in response to one of the complaints.

Oakland’s Department of Workplace and Employment Standards examined the restaurant’s bookkeeping records and service charge policy, along with reviewing testimony from workers and the employer. The department sent restaurateur Imana, 26, a letter in December 2023 stating that Hi Felicia was found to have violated Oakland’s minimum wage law. The main wage violation was related to Hi Felicia’s service charge policy.

The restaurant charged diners a 20 percent service fee as part of their checks between April 2022 and May 2023, the letter said. According to Oakland’s Department of Workplace and Employment Standards, Hi Felicia improperly shared the service charge with non-service staff. The service fees were supposed to be given to certain employees instead of being shared among all the restaurant’s workers. 

The department found that the employer used 50 percent of the service charges from customer checks to increase hourly pay for the entire restaurant staff. However, Oakland’s minimum wage law requires all the service fees received to be given in full only to employees who serve customers. Employers are not allowed to distribute service charges to supervisors and back-of-the-house workers unless their job duties also include service work.

In a complaint brought to the city, a former worker pointed out that Hi Felicia’s employee handbook stated that 50 percent of the service charge added to diners’ bills would be given directly to restaurant staff. The remaining half would go toward higher pay for all workers.

Hi Felicia was given 45 days to pay $105,555 in restitution to over a dozen former workers. The amount consisted of the remaining service charges that the restaurant owed to its staff. 

In an Instagram post, Imana said she would appeal the decision. She claimed she had been unaware of Oakland’s service charge policies and blamed Hi Felicia’s improper pay practices on her lack of knowledge about the city’s minimum wage laws.

Many Bay Area restaurants are increasingly moving away from traditional tipping by automatically adding service charges to customer checks. However, the transition has been controversial and far from smooth. Tipping and wage regulations can be confusing, especially if employers try to pass off unlawful pay practices as the norm. In some cases, employers unknowingly commit wage and hour violations. 

Whether your unpaid wages were deliberate or unintentional, you deserve to be paid in full for all hours worked. As a restaurant worker, you have important rights under California law. If you suspect your employer is not paying you properly, there are steps you can take to recover your owed wages.

A common type of wage violation in the restaurant industry includes failure to pay the minimum wage or proper overtime when employees work more than their allotted hours. Another issue is tip theft, where employers unlawfully confiscate or redistribute tips earned by staff.

Misclassification of employees as independent contractors also occurs in restaurants, depriving workers of benefits and protections. Additionally, employers are not allowed to make illegal deductions from wages, such as for uniforms or breakages. Another frequent wage and hour violation is when restaurants fail to provide employees with required meal and rest breaks, or they may deduct break time from workers’ pay even when breaks are not taken.

If you have experienced wage theft, get in touch with Erlich Law Firm. Our Oakland employment lawyers will answer all your questions and fight to recover the pay you are owed. We have helped workers resolve all types of wage and hour claims. Contact us today for a free initial consultation to discuss your case.