EEOC Wins Pay Bias Settlement in Hospitality Industry

Extended Stay Hotels has agreed to pay $75,800 in a recent settlement of a pay bias lawsuit in which a female worker was paid less than male employees.  According to the Equal Employment Opportunity Commission’s (“EEOC”) suit, Extended Stay Hotels paid Latoya Weaver less than male guest services representatives, including some newly hired male guest services representatives, at the hotel’s Lexington Park, Maryland, location.  The EEOC further charged that Extended Stay Hotels unlawfully paid other female employees lower wages than those paid to male employees for performing equal work.

The conduct alleged above violates the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964.  The EEOC filed suit (EEOC v. HVM L.L.C., D/B/A Extended Stay Hotels, Civil Action No. 8:13-cv-01980) in U.S. District Court for the District of Maryland, Greenbelt Division, after first attempting to reach a voluntary pre-litigation settlement through its conciliation process.  

In the conciliation process, EEOC investigators work with the employee and the employer to negotiate a mutually agreeable remedy to the alleged act of employment discrimination. “Conciliation” provides an opportunity to lessen the impact of the harsh feelings involved in an employment discrimination complaint and to avoid or lessen costs of representation of the employer in the case before the EEOC.

When Conciliation does not result in a settlement between the complainant and the employer, the commission decides whether to litigate the charge against the employer or to dismiss the complaint.  If the EEOC decides to file an employment discrimination case in federal court, the EEOC represents the employee, and the employer defends against the charges.

If the EEOC determines that there is no reasonable cause to believe that discrimination occurred, the charging party will be issued a Dismissal and Notice of Rights letter that informs the charging party of the right to file a lawsuit, without EEOC involvement, in federal court within 90 days from the date of receipt of the letter. The employer will also receive a copy of this document.

In addition to the $75,800 in monetary relief to Weaver and three other class members, the two-year consent decree resolving the lawsuit enjoins Extended Stay Hotels from engaging in wage discrimination based on sex in the future.  The hotel chain will provide annual training on federal anti-discrimination laws, report to the EEOC about its handling of any wage discrimination claims and post a notice on the Weaver settlement.

PK Law Labor and Employment Attorneys are familiar with the EEOC complaint process.  If your  business is involve in an EEOC pay bias investigation, it is strongly recommended that you contact an experienced labor and employment attorney, promptly. 


This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.

The New Maryland Minimum Wage

The Maryland General Assembly has passed a new Minimum Wage law (the “MW” in this article), which when signed by the Governor, which is a foregone conclusion, will go into effect on January 1, 2015 (House Bill (HB) 295/Senate Bill (SB) 331).

Here are some interesting changes to the Labor and Employment Article of the Annotated Code of Maryland (§3-403 and following) relating to the new law:

Some deletions from the statute:

  • Exemptions from the law were removed for those at least 62 years old employed no more than 25 hours a week as well as employees of drive-in theaters so those employees are now covered under the law.
  • Of course, the pre-HB 295 MW of $6.15 per hour is removed.

Changes to the law, other than deletions:

  • The exemption for an establishment that “sells food and drink for consumption on the premises” (not just restaurateurs) is raised from $250,000 to $400,000, or less, in annual gross income.
  • The term “employer” now includes “a governmental unit”.
  • The law implements the increased state MW as a “phase-in”:
    • From January 1, 2015 to July 1, 2015: $8.00 per hour;
    • From July 1, 2015 to July 1, 2016: $8.25 per hour;
    • From July 1, 2016 to July 1, 2017: $8.75 per hour;
    • From July 1, 2017 to July 1, 2018: $9.25 per hour; and
    • From July 1, 2018 and thereafter: $10.10 per hour.
    • An employer may pay 85% of the state MW or $7.25 an hour to an employee who is under the age of 20 years, but only for the first six months of employment provided that the employer is “an amusement or recreational establishment, including a swimming pool,” and if “the employer operates for no more than 7 months in a calendar year or “for any 6 months during the preceding calendar year, has average receipts in excess of that do not exceed one–third of the average receipts for the other 6 months.”
    • If the employer is found to have violated the MW statute the employee may recover the difference between the MW and what was paid and an additional sum equal to the difference between the MW and what was paid as liquidated damages unless the employer acted in good faith and reasonably believed itself to be in compliance with the law.
    • Under existing law an employer may “set” an amount which represents “the tips of the employee” as a “tip credit” against the MW, for those working for “tips”.  The new law sets a maximum “tip credit” equal to the MW amount less $3.63 (half the current federal minimum wage).  (According to the fiscal note to the legislation:  “Under the bill, an employer who employs a worker who receives tips may claim a tip credit of the State minimum wage, less $3.63. Thus, the tip credit increases as the minimum wage increases, and the wage paid by employers to tipped employees remains $3.63, as long as their wages plus tips equal the minimum wage.”)
    • The statute mandates that the Governor appropriate an increase of 3.5% in the State budget year over year through fiscal year 2019 for caregivers to the “developmentally disabled”.

It is important to bear in mind that for those employees subject to both the federal and state MW, those employees must be paid the greater of the two minimum wage amounts.  The current federal minimum wage is set at $7.25 per hour, but there is federal executive and legislative branch movement to increase that amount to $10.10 an hour.

The attorneys at PK Law can guide you in applying the new law to your business, assist you with a full wage and hour audit or, if necessary, defend you and your business in a wage and hour action.  For more information contact Leslie Stellman, Edmund O’Meally, Mark Maneche or Greg Weiner.

One “Tip” That Won’t Soon Be Forgotten

Recently, Philadelphia sports bar and restaurant chain Chickie’s & Pete’s (“C&P”) signed a consent judgment with the Department of Labor agreeing to pay current and former employees more than $6.8 million in back wages and damages for improperly taking tips from servers and violating federal minimum wage, overtime and record-keeping requirements.  At the time of this article went to press, the proposed consent judgment had been filed in the U.S. District Court for the Eastern District of Pennsylvania and will be subject to the review and approval by the Court.  In what the Department of Labor described as one of its largest tipped employee investigations in recent years, C&P and its owner, Peter Ciarrocchi, Jr., have agreed to pay $6,842,412 to 1,159 employees at nine of the company’s locations, plus a $50,000 civil money penalty.  The remaining $1.68 million is to settle federal lawsuits by about 90 current and former employees.

Under the Fair Labor Standards Act (“FLSA”), tips are the property of the employee who receives them; however, restaurant operators can benefit by claiming a credit based on the tips towards their obligation to pay those employees the full minimum wage. If an employee’s tips combined with the employer’s direct wages do not equal the minimum wage, the employer must make up the difference during the pay period. An employer that claims a tip credit is required to pay a tipped employee only $2.13 an hour in direct wages provided that amount plus the tips received equals at least the federal minimum wage of $7.25 an hour. The federal minimum wage of $7.25 per hour was last increased in 2009 and the federal tip credit’s cash wage requirement of $2.13 has not been increased since 1991.  According to the Department of Labor, C&P’s behavior is “…troubling because [it] both unlawfully took tips from its workers and failed to pay them even the $2.13 per hour the law requires when an employer takes a tip credit.”  Investigators found that the company improperly retained a fixed portion of the tips servers received from customers.

The investigation disclosed that C&P required servers to contribute a portion of their tips to an improper “tip pool,” or tip-sharing arrangement, which was approximately between 2 percent and 4 percent of the server’s daily table sales. C&P illegally retained approximately 60 percent of the tip pool.  According to published reports, about 40 percent of the tip money collected by managers went to bartenders on duty, which is legal according to the DOL, while management kept the rest.  This amount had come to be known as “Pete’s Tax” and was required to be paid to the manager in cash at the end of each shift, even if the server received all tips on credit cards and therefore did not have cash on hand. In some cases, the company required employees to use their own money to contribute to this pool by withdrawing cash from a nearby ATM or borrowing from another server.  Also, the DOL indicated that the exact loss to employees could be calculated because the chain kept meticulous records of the amounts as part of its business model.

Additionally, servers and bartenders were paid only a flat rate of $15 per shift at all locations except for C&P’s airport establishment  an amount that was not sufficient in all cases to even cover the minimum cash wage of $2.13 per hour that must be paid to a tipped employee when an employer claims a tip credit under federal law. Additionally, the employer failed to pay the required overtime wages to these employees when they worked in excess of 40 hours in a week. Investigators also determined that employees were not paid for time spent in mandatory meetings and training, and were improperly required to pay for uniforms.

Under the provisions of the consent judgment filed in U.S. District Court for the Eastern District of Pennsylvania, and subject to court approval, the company will pay minimum wage and overtime back wages and is required to return the improperly retained tips to the servers, as well as pay liquidated damages. In addition, the company has agreed to enhanced compliance, including:

  • External compliance monitoring for an 18-month period;
  • Internal compliance monitoring for an additional 18-month period;
  • Training for all employees on their rights under the FLSA;
  • Providing a statement to any employee required to contribute to a tip pool detailing the amounts that were contributed by the employee, the job categories of workers included in the tip pool and the specific percentage each category receives; and
  • Peter Ciarrocchi, Jr., will write an article for a restaurant trade publication that addresses an employer’s obligations under the FLSA.

The consent judgment also calls for C&P and Ciarrocchi to be permanently enjoined and restrained from violating the provisions of the FLSA in the future.

The FLSA requires that covered, nonexempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates of pay for hours worked beyond 40 per week. Employers also are required to provide employees notice about the FLSA tip credit provisions, to maintain accurate time and payroll records and to comply with the hours, hazardous orders and other restrictions applying to workers under age 18.

If you are an  “employer” in the hospitality industry it is very likely that you have heard of cases involving employees who have sued their employers for wage and hour violations.  You could be next.  Taking some time to audit how you classify and pay your employees and correcting any problems could save you a significant amount of money in legal fees, back taxes, back wages and penalties.  Plaintiff lawyers, along with state and federal regulatory agencies, are on the hunt for business owner violators.

The attorneys at PK Law can assist you with a full wage and hour audit, or if necessary, defending you and your business in a wage and hour action.  For more information


This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.

Affordable Care Act Redux

Another delay in implementation of the Affordable Care Act (“ACA” or “Obamacare”) has prompted PK Law to update our material on the Act.  Here are some points to bear in mind as March 31 approaches:

For Employers:

  • The ACA’s “employer mandate” generally requires that employers offer certain minimum levels of “affordable” health care coverage to a certain percentage of their employees or pay a “penalty” of up to $2,000 for each employee not offered coverage, though workers are not required to sign up for the benefits offered by the employer..
  • “Affordable” is defined as premiums of no more than 9.5 percent of an employee’s income.  Employers must pay for the equivalent of 60 percent of the actuarial value of a worker’s coverage.
  • Employers with less than 50 full-time employees (30 hours a week) are already exempt from the ACA’s employer mandate.  They are eligible to secure coverage from a marketplace designed for them known as the “Small Business Health Options Program or “SHOP”.
  • Employers with 50 to 100 full-time employees must comply with the employer mandate beginning in 2016 – a delay recently granted by the Administration.
  • Employers with 100 or more full-time employees “large employers” must comply with the employer mandate in 2015, having already received a delay in implementation.
  • Large employer implementation will be “phased in” in 2015 by allowing those employers to offer coverage to 70% of their workers as opposed to the 95% coverage level presently required under law.  95% coverage must be provided in 2016.
  • Volunteer firefighters, part-time teachers and adjunct professors who teach less than 15 hours a week will not be counted as full-time employees, according to a recently released “final regulation”.
  • Employers must certify via a report that employees were not released or reduced in hours to avoid provision of coverage.
  • Adjunct professors’ status as full-time employees is to be based on an hour and 15 minutes of preparation outside the classroom for every hour spent teaching in the classroom, according to the final regulation.
  • The new rule determines that and that teachers working full-time during the school year do not count as part-time employees if they have the summer off.

For Individuals and Families:

  • Most individuals who make less than 400% of the federal poverty level, or $94,200 for a family of four, are eligible for subsidies to help pay for their health insurance.
  • Individuals must have health care insurance by March 31, 2014, either through an employer or a “Health Insurance Marketplace” (a “Marketplace”)(see other PK Law material on the Affordable Care Act) when “open enrollment” for the “marketplaces” ends, or face a penalty for failing to obtain coverage.
  • If an individual or family obtains health insurance through the Marketplace, advance payments of the premium tax credit may be available to immediately help lower the monthly premium.
  • For most people, the ACA has no effect on their 2013 federal income tax return.
  • However, for some people, a few provisions could affect their tax returns, such as increases in the itemized medical deduction threshold, the additional Medicare tax and the net investment income tax
  • The “individual shared responsibility” provision of the ACA and its “premium tax credit” provision do not affect a “payor” of premiums’ 2013 federal income tax return.
  • “Individual Shared Responsibility Payment” requires that as of January, 2014, individuals (including children) must have health care coverage, have an exemption from coverage, or make a payment when filing their 2014 tax return in 2015.  Those who already have qualifying health care coverage will not need to do anything more than maintain that coverage throughout 2014.
  • The “Premium Tax Credit” (“PTC”) is available if insurance is obtained through a “Marketplace”.  If so, the premium payor may be eligible to claim the PTC. The payor may elect to have advance payments of the PTC sent directly to the payor’s insurer during 2014, or wait to claim the credit until the filing of his or her tax return in 2015. If the payor chooses to have advance payments sent to his or her insurer, the payor will have to reconcile the payments on his or her 2014 tax return, which will be filed in 2015. If the payor is already receiving advance payments of the PTC, he or she need do nothing at this time unless he or she has a “change in circumstance” such as a change in income, marital status or family size.  Any of those changed circumstances should be reported to the Marketplace from which insurance is obtained.
  • Filing Requirement: If a premium payor does not have a tax filing requirement, he or she need not file a 2013 federal tax return to establish eligibility or qualify for financial assistance, including advance payments of the premium tax credit to purchase health insurance coverage through a Health Insurance Marketplace.

The ACA remains a complicated piece of legislation.  The grant of delays in compliance with the law has made the rules more confusing.  PK Law’s Corporate and Business Services Attorneys and Labor and Employment Law Attorneys can assist employers with the law and its associated regulations.  For additional assistance contact

Legislative Matters – Labor and Employment

The Maryland legislative session is in full swing.  While there remains the possibility of additional bills being introduced which impact Maryland employers and employees (as well as other topics/citizens), the historical outlook is that those bills not pre-filed or filed in the early days of the session will fall to the wayside unless of utmost importance.  The reason that late filings get scant attention is that the Maryland legislature only sits for approximately 90 days, convening January 8 and adjourning (sine die) on April 7, 2014, leaving insufficient time to digest a “late filed” bill’s impact.  Indeed, both the Senate and House “Bill Introduction Date[s]” have now passed and any legislation to be considered now until the end of the session must first pass through the respective Senate and House Rules Committees to even be allowed further committee assignment and hearing.

The Education, Labor and Employment team at PK Law believes that with the passing of the Bill Introduction Date[s] that it would now be a good time to summarize some of the more important pending Maryland legislation.  The bills mentioned below impact the Labor and Employment Article of the Annotated Code of Maryland.

The following are very brief “thumbnails” of bills which are generally considered of some importance in the labor and employment arena.  Each bill must be consulted for specifics and a more complete understanding of the provisions of the legislation.

SB216, HB219: Provides for issuance of subpoenas by the Workers Compensation Commission upon request of a party in a currently pending matter.

SB494, HB411:  Attaches a presumption of Workers’ Compensation compensability to correctional officers suffering from heart disease and hypertension resulting in total disability or death.

SB215, HB280:  Prohibiting employers or their insurers, generally, from being required to pay for prescriptions that are dispensed by physicians to employees covered under Workers’ Compensation who have suffered accidental personal injuries, compensable hernias, or occupational diseases.

SB507: Focuses on establishment of a fee schedule for repackaged and relabeled drugs and pharmaceutical bills in Workers’ Compensation cases and requires that pharmacy bills submitted for reimbursement contain specified information.

HB168:  Requires that the Governor remove a member of a board, commission or council within the Department of Labor, Licensing and Regulation who does not attend at least 2/3rds of the meetings during the prior year the member was serving and that a successor to such person be named.

SB753, HB 527:  Generally requires employers of more than nine employees to provide paid “sick and safe” leave to employees and sets forth the manner in which such leave time is to accrue.

SB737, HB527:  Requires employers with 15-49 “eligible employees” to provide them with 6 weeks unpaid “parental leave”.

HB467:  Permits a parent to apply for a minor’s work permit.

SB371, HB187:  Deals with manner of setting the Minimum Wage in Maryland.

SB331, HB 295:  The Administration’s bill to increase the Minimum Wage and index it to inflation.

SB126, HB173:  Provides that correctional officers and others in “direct personal contact” with correctional facility inmates be required to take a polygraph examination in spite of the State’s prohibition against employers requiring same.

HB435:  Attempts to make Maryland a “Right to Work” state so that employees cannot be required to join a union and pay dues.

SB130:  Provides for electronic sharing of reports of accidental injury or disability due to occupational disease between the Workers’ Compensation Commission and the Commissioner of Labor.

SB921:  Creates the Maryland Secure Choice Retirement Savings Program and Trust to provide a comprehensive scheme for a retirement savings vehicle for employees who are not covered under an employer retirement plan.

The foregoing are just a few of the more salient pieces of legislation currently before the Maryland legislature impacting the Labor and Employment provisions of the Maryland Code. 

To contact a PK Law Labor and Employment Attorney click here  or contact


This information is provided for general information only.  None of the information provided herein should be construed as providing legal advice or a separate attorney client relationship. Applicability of the legal principles discussed may differ substantially in individual situations. You should not act upon the information presented herein without consulting an attorney of your choice about your particular situation. While PK Law has taken reasonable efforts to insure the accuracy of this material, the accuracy cannot be guaranteed and PK Law makes no warranties or representations as to its accuracy.