The U.S. Department of Labor has filed a lawsuit against Ohio-based taco chain Barrio Tacos, alleging wage violations at all three of its Michigan locations. The complaint was filed in U.S. District Court for the Western District of Michigan, Southern Division on September 7, seeking $823,000 in back wages and damages for 177 workers.
The labor department’s Wage and Hour Division conducted an investigation involving alleged Fair Labor Standards Act violations by the three restaurants — Sparty Tacos in East Lansing, TC Tacos LLC in Traverse City, and GR Tacos LLC in Grand Rapids (all of which go by the name Barrio Tacos) — and the owner of the franchise locations, Jacob Hawley.
The lawsuit claims that over at least the past two years, Hawley and his restaurants engaged in an unlawful tip-sharing scheme, in which workers were required to give a portion of their tips to managers after each shift, who would then redistribute these tips to non-tipped employees. The restaurants also allegedly denied tipped employees the federal minimum wage of $7.25 per hour. Employees were incorrectly paid overtime based on the tip credit rate instead of the applicable minimum wage rate and the restaurants also failed to keep accurate records of workers’ hourly rates and overtime.
In addition to seeking a total of $823,324 — which includes $411,662 in back wages and an equal amount in liquidated damages — the Wage and Hour Division also assessed Hawley and his three establishments $23,904 in civil financial penalties for the alleged violations.
“Far too often, our investigators find restaurant industry employers violating the law when they fail to follow applicable wage laws for their employees. There are specific rules for paying tipped employees, for how tips must be distributed, for paying proper overtime and for keeping employment records,” said Wage and Hour District Director Mary O’Rourke in Grand Rapids, Michigan, in a written statement distributed to media on Tuesday. “Workers have the right to be paid fairly and fully for the jobs they do and employers must respect these rights.”
Barrio Tacos has experienced its share of controversy since its establishment in 2012 in Cleveland’s Tremont neighborhood. The chain has gone on to open locations throughout Ohio, Massachusetts, New Hampshire, Florida, Texas, South Carolina, and Michigan (the three Michigan franchise locations are owned by Hawley).
According to Cleveland.com, former Barrio partner Joe Kahn was accused in a 2018 lawsuit of stealing trade secrets — arguing that the use of Day of the Dead decorations and a build-your-own taco approach with Mexican vibes were wholly unique and deserving of protection by the courts — and violating an agreement with co-founders Tommy Leneghan and Sean Fairbairn by opening a similar concept, Condado Tacos in 2014 in Columbus and the northeast Ohio suburbs. A judge dismissed the lawsuit in 2021, saying “When viewed as a whole, [Barrio’s format] is overwhelmingly comprised of generic elements.”
Hawley began opening franchise locations in Michigan in 2020, beginning with a spot in East Lansing, followed by Traverse City in 2021, and Grand Rapids in 2022. Hawley is expected to launch another Michigan location in Kalamazoo by the end of 2023.
Correction: September 19, 2023, 5:00 p.m. This article was corrected to show the current federal minimum wage is $7.25.