Denver Thai Restaurant Pays $62K After Federal Investigation Finds Unlawful Tip Retention

The Department of Labor's Wage and Hour Division recovered $61,568 in back wages for 11 employees of Tommy's Oriental Food Inc., operating as Tommy's Thai in Denver, following findings that the employer unlawfully retained all employee tips in violation of the Fair Labor Standards Act. The investigation also uncovered failures to maintain accurate records of hours worked and to display the required FLSA workplace poster. In addition to back wage recovery, the employer paid a $990 civil money penalty for the violations.

Section 3(m)(2)(B) of the FLSA prohibits employers from keeping any portion of employee tips regardless of whether the employer takes a tip credit against minimum wage obligations. This prohibition applies to all employers, including managers and supervisors, and extends to both traditional tip pooling arrangements and direct tip retention. The Department has discretionary authority to assess civil money penalties for violations of the tip retention provisions, with penalty amounts adjusted annually for inflation and determined based on the seriousness of violations and the size of the employer's business.

The recordkeeping violations centered on the employer's failure to maintain complete records of all hours worked by employees, as required under 29 CFR Part 516. Federal regulations require employers to preserve payroll records containing employee identification, hours worked each day and week, total wages paid, and other specified information. While recordkeeping failures alone carry no direct civil money penalty, they can serve as aggravating factors in enforcement actions and may extend statutes of limitations for wage claims.

"Violations like these are all too common in the food service industry," said David Skinner, Wage and Hour Division district director in Denver. "Most restaurant employers are legally obligated to comply with the FLSA, which prohibits employers, including managers and supervisors, from keeping any portion of another's tips."

The enforcement action comes as Colorado's restaurant industry navigates significant wage law changes. Effective January 1, 2026, Colorado's state minimum wage increased to $15.16 per hour, with tipped employees entitled to a minimum cash wage of $12.14 per hour (employers may claim a maximum tip credit of $3.02). Denver maintains higher rates, with a $19.29 general minimum wage and $16.27 tipped minimum wage for food and beverage workers. Recent state legislation (HB 25-1208) now permits local governments to increase tip credits beyond the state's $3.02 offset when setting minimum wages exceeding state levels.

Restaurant employers can access compliance assistance through the Wage and Hour Division's toll-free helpline at 866-4US-WAGE (487-9243). The agency offers industry-specific compliance toolkits and a PAID program that allows employers to self-report and resolve potential FLSA violations. Workers who believe they may be owed back wages can use the Department's search tool to check for funds collected on their behalf.

Key Points

• Federal investigation found Tommy's Thai unlawfully retained all employee tips from 11 workers
• DOL recovered $61,568 in back wages; employer paid additional $990 civil money penalty
• Employer cited for three violations: tip retention, recordkeeping failures, and missing FLSA poster
• FLSA Section 3(m)(2)(B) prohibits employers and managers from keeping any portion of employee tips
• Recordkeeping violations involved failure to maintain accurate records of all hours worked by employees
• Enforcement occurred as Colorado implemented 2026 minimum wage increases and new tip credit flexibility

Primary Source: Wage and Hour Division, U.S. Department of Labor

Primary Source Author: Wage and Hour Division, U.S. Department of Labor

Primary Source Link: https://www.dol.gov/newsroom/releases/whd/whd20260212

Supplemental Links

• FLSA Tip Regulations - 29 CFR § 531.52
• Civil Money Penalties for Tip Violations - 29 CFR Part 578
• FLSA Recordkeeping Requirements - 29 CFR Part 516
• DOL Fact Sheet #15: Tipped Employees Under the FLSA
• DOL Fact Sheet #21: FLSA Recordkeeping Requirements
• FLSA Workplace Poster Requirements - 29 CFR § 516.4
• DOL Compliance Assistance Resources
• WHD Workers Owed Wages Search Tool
• Colorado Minimum Wage Information (2026)
• Colorado HB 25-1208 - Local Tip Credit Authority