So what’s up with this DOL press release about Clover? The quick answer is that the DOL decided after a multi-year investigation that our food truck General Managers should be paid as hourly employees and cannot be considered salaried employees. I don’t know whether they are applying this to all food truck companies in Boston or just Clover. We didn’t know this standard, and it seems sort of arbitrary to me. Read on for more detail.
We can’t afford to fight the DOL in court so after an investigation spanning more than 4 years we settled. The settlement explicitly said “Therefore, the Secretary agrees to accept and the Employers agree, without admitting or denying liability, to pay $39,669.48.” The reason the total was 79,338.96 is because the DOL has a policy of doubling everything, they call it liquidated damages. In reality we paid 83,721.90 including payroll taxes. I hadn’t talked about it in the past because I didn’t think I was allowed to. The DOL didn’t warn us that they were sending a press release to all major media outlets in Boston. The press release was misleading and inaccurate. Follow the nitty gritty details.
From day 1 at Clover I’ve wanted us to adhere to all laws and regulations. The restaurant industry is known to operate in grey ways. I don’t want Clover to be grey. We’re going to be pure white. From day 1 on.
Not allowing a manager of a food truck to be considered a salaried employee was nothing we saw coming. And honestly, I don’t think it’s right. Food truck managers did the same kind of training, had the same kind of responsibilities, built the same relationships with staff and customers as restaurant managers. I think if we went to court with the DOL we’d win. But who knows, we can’t afford to fight the case. We are still a tiny company, but we were much smaller back in 2015. I didn’t have an employment lawyer as we do now. We thought we were doing everything on the up and up, and when this thing with the DOL came up it was really disturbing and I spent an absurd amount of time (literally weeks) holed away with reports and reams of data and payroll records.
Over the investigation period the DOL investigator thought we may have missed as much as $39,669 in wages. We disagree with that amount and no fault has been found. The investigation was over a 4 year period where total Clover payroll was $17,052,779.72. Most of the $39k was determined by deciding our food truck managers should not be considered salaried employees. They took the hours worked by these employees, assumed that if they were hourly we’d be paying them an hourly pay of their weekly salary divided by 40 hours. Then applied that rate x 1.5 (overtime) to an assumed number of hours per week.
In addition to the food truck manager issues (which were the bulk) they found we made a total of $2,396.33 in overtime errors. During this investigation we also found that we OVERPAID due to overtime hours by $5,500 (of course we didn’t seek to get that back, but I found that errors work both ways). Most errors were because our Payroll person was making a mistake in some calculations. There were periods where she had used the hours worked over 2 weeks to determine overtime (instead of 1 week). We pay bi-weekly, but DOL wants overtime calculations to be weekly. We did it correctly in most cases but there were a few incidents over the period where the calculations were in error. It was an honest mistake I was unaware of until the investigation. I wrote a letter to the DOL back in September 2015 when this first came to light saying that I wanted to cut those checks right away to fix this problem. They said no, it was now a part of their investigation. An investigation that wasn’t resolved until 2018. Happily those folks have now been paid. But I think we should have been able to fix that back in 2015. Sorry. I warned this stuff gets pretty technical. Gets worse from here.
We had a couple of situations where restaurant managers overlapped (for example, when a manager quit and the replacement came to work alongside them for a hand-off period). The DOL took the stance that because those 2 people were working at the same restaurant we shouldn’t have paid them both salary. This was a small # of dollars.
There was one situation where we had a salaried employee dealing with mental health issues who asked to have a flexible work schedule which of course we were happy to do. The DOL didn’t like that we did this. They thought we should have moved that employee to hourly pay and some small part of the claim of back wages was related to that situation. There is no way the same standard would have been applied to a salaried employee in another industry.
Finally, we had salaried employees who took days off of work when their PTO balance was exhausted. We have had a flexible policy on this. If people want to take more vacation it’s fine, you just take the days unpaid. The DOL said the deductions were improper. We believe they were done correctly, we have documentation of requests from employees for those days that I shared with the DOL but received no response.
At the end of the day the DOL wanted us to settle. We couldn’t afford to fight in court so we did. Some of the settlement I feel fantastic about (e.g., the overtime errors, wish we’d paid those properly the first time, or been allowed to fix that back in 2015). Some of the settlement I feel good about (I don’t believe we paid the truck managers improperly, and none of them expressed this either, but how can I be mad about paying any employee I love more money?).
But the DOL’s treatment of this, I’m a bit emotional about that. How can things work this way? How can we have a system where small business owners are trying to follow every law but still can’t get it right? Don’t we need to change that? It should be easy to know how to be law-abiding, right? And if something happens that was completely unintentional and you’re willing to fix it should you be punished?
And what a nasty press release. How many cases does the DOL settle each year? Does anybody know? How many in Massachusetts this year? How many of these cases have press releases? Seems like a lousy thing to me.