Dartmouth, which owns the Hanover Inn, has agreed to pay $2,000 in fines for several hundred labor law violations at the Inn including immigration violations, and wage and hour violations in a settlement with the New Hampshire Department of Labor. The settlement also required the College to pay $29,000 in back pay to the Hanover Inn’s catering employees.
The College did not admit guilt, but decided to pay the settlement to minimize litigation costs, Dartmouth associate general counsel Kevin O’Leary said in an interview with The Dartmouth.
“We engaged in the settlement because it was a way to avoid the cost and distraction of having to litigate with the state the issue,” he said. “In addition, it was our understanding that the state was agreeing with the method that we were using to pay people, so there wasn’t any reason for us to spend the College’s resources litigating the issue.”
The Department of Labor inspected the Hanover Inn in winter 2009 in response to several worker complaints that employees were receiving inadequate pay. The inspection resulted in more than 740 citations for violations of labor laws, including more than 550 violations of the hourly minimum payment rate, 130 violations of paperwork requirements, 30 violations for paying employees for fewer than two paid work hours in a day, 14 violations for failing to have the proper paperwork for workers under 18 years of age, eight violations for employing illegal aliens without proper documentation and one violation for not obtaining permission from the Department of Labor to pay workers less frequently than once a week.
The settlement, reached on June 3, reduced the penalty for the violations from $94,300 to $2,000.
The original penalty was calculated by imposing a fine for each violation.
“The way penalties are imposed is that there is a fine per violation, and they found there were 750 violations, so it’s a multiplier,” O’Leary said.
State law requires that caterers receive a “tipped wage” of 45 percent of the state’s minimum wage, assuming that the wage will be supplemented by a service charge. The College allocated 94 percent of the service charge to caterers based on how many hours they had worked, distributing 6 percent to managers and supervisors, according to Hanover Inn General Manager Carl Pratt.
Inn employees said that they should have received the full minimum wage, rather than the tipped minimum wage, because a portion of the service charge was allocated for managers and supervisors, according to a former Hanover Inn employee who wished to remain anonymous given that the worker’s claims are still pending. Alternatively, the Inn should have paid the caterers the entirety of the service charge, the employee said.
As a part of the settlement agreement, the College agreed to pay Hanover Inn caterers half of the difference between the tipped minimum wage and the state minimum wage. Several employees filed claims with the Department of Labor requesting the remaining half of the discrepancy between the state minimum wage and that which they originally received.
The unnamed employee charged that the Hanover Inn engages in unethical business practices because customers believe that the entire 17- percent service charge goes to caterers.
The employee also said that several employees were not told specifically how them service fee was allocated and suspected that they were not receiving adequate compensation.
“The Inn told us, If you want to go through the books, you can,'” the unnamed Hanover Inn employee said. “I’m not an auditor, and I can’t go in there and figure it out. They made it inaccessible intentionally, I believe.”
David Sherwyn, a law professor at Cornell University’s School of Hotel Administration, told The Dartmouth that employers are not legally obligated to tell employees how the service fee is divided because it could reveal sensitive information, including employee salaries.
“It would be a righteous thing to do, but it could be a real pain,” Sherwyn said. “For the employer to sit there and give you a full accounting, they’re also telling you what the function costs and maybe that is none of your business.”
In the hospitality industry, individuals who do not have managerial responsibilities like hiring and terminating employees may still be given the title of “manager.” Sherwyn said that a “manager” who does not actually oversee company operations should be permitted to receive tips as a part of his salary.
“True managers generally should not be tipped,” he said.
Regarding the immigration labor law violations, O’Leary said that the Hanover Inn does not employe illegal aliens. Rather, the Inn lacked Employee Eligibility Verification, or I-9 forms, for several employees who did not bring proof of citizenship when they began their jobs.
“There was never an issue that the Hanover Inn employed illegal aliens,” O’Leary said. “The issue was that the College did not have the I-9 forms for eight employees at the time of the inspection. The lack of an I-9 form does not mean that we employ illegal aliens.”
O’Leary said that the employees who were paid for fewer than two work hours in a day had left voluntarily.
“We had instances in which our time records were paid for less than two hours,” O’Leary said. “We believe that in some of those cases, [the employees] wanted to leave early or were asked if they wanted to leave early.”
To avoid similar violations in the future, O’Leary said that the Hanover Inn is considering no longer allowing employees to leave early and taking steps to anticipate when fewer employees will be needed.
O’Leary said that the Hanover Inn did not realize that it failed to get permission to pay one of its workers less frequently than once a week.
“We [have since] requested and received the permission,” O’Leary said. “We thought that we had done it in the past, but we could not find any record of it.”
Sherwyn said that this is a trivial violation.
“That’s so antiquated,” he said. “There are not that many states that require a weekly pay.”