It’s the kind of news that makes you double-check your receipt the next time you go out for margaritas. For a couple of years, if you grabbed a taco at certain Barrio Tacos locations in Michigan, the tip you left for your server might not have stayed with them. In fact, a federal court recently decided that those tips were being handled in a way that flat-out broke the law.
Honestly, wage theft sounds like a heavy term, but in the restaurant world, it’s often hidden in the fine print of "house policies." In this case, the Barrio Tacos back wages lawsuit ended with a judge ordering the owner to pay a staggering $823,326 in back wages and damages.
This isn't just about a few missing bucks here and there. It's a massive case involving 177 workers across three different cities. If you’ve ever worked in service, you know how much every dollar counts, and this settlement is a huge deal for the people who were actually doing the work.
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The Core of the Barrio Tacos Back Wages Lawsuit
The whole mess started with an investigation by the U.S. Department of Labor (DOL). They started looking into three specific locations: East Lansing (Sparty Tacos LLC), Grand Rapids (GR Tacos LLC), and Traverse City (TC Tacos LLC).
Basically, the owner, Jacob Hawley, had a system where servers and bartenders had to hand over a chunk of their tips. These tips were then pooled and given to people who don't usually get tips—like the kitchen staff. Now, that might sound "fair" or "collaborative" on the surface, but under the Fair Labor Standards Act (FLSA), it’s a major red flag.
Why the Tip Pool Was Illegal
Here is the deal: if an employer takes a "tip credit"—meaning they pay the staff less than the standard $7.25 minimum wage because they expect tips to make up the difference—they cannot give those tips to "back-of-house" workers like cooks.
- The Problem: Barrio was paying servers as little as $3.67 to $3.75 an hour.
- The Violation: Because they were paying below minimum wage, they were legally required to keep the tips among "customarily tipped" employees.
- The Result: By giving that money to the kitchen, they lost the right to pay the lower "tipped" wage.
Once that tip credit became invalid, Barrio Tacos suddenly owed every one of those workers the full federal minimum wage for every hour they ever worked during that period. That adds up fast.
Breaking Down the $823,000 Payout
The math on this is pretty intense. The court didn't just ask for the missing money back; they doubled it. This is what's called liquidated damages. It’s basically a penalty for breaking the rules, ensuring that the workers are compensated for the delay in getting their rightful pay.
- Back Wages: $411,663. This is the raw amount the workers were shorted.
- Damages: $411,663. This is the "extra" to make things right.
- Total: $823,326.
Think about that for a second. For 177 workers, that’s an average of roughly $4,651 per person. For someone working a service job, that’s life-changing money. It’s a car down payment, several months of rent, or a huge weight off their shoulders.
More Than Just Tips
It wasn't just the tip pooling that got them in trouble. The DOL investigation found that the restaurants were also messing up overtime. When a server worked more than 40 hours, Barrio was reportedly calculating their overtime based on the lower "tipped" rate instead of the full minimum wage.
Also, they weren't keeping good records. You can't just "guestimate" what people are owed. Federal law requires precise tracking of hours and pay, and according to the lawsuit, Barrio's record-keeping was a mess.
The Defense vs. The Reality
Jacob Hawley, the owner, reportedly claimed that he didn't "take" the money for himself. In his view, it was about "fostering harmony" between the front of the house and the kitchen. He basically argued it was a distribution error.
But the court didn't really buy the "we're all a family" excuse. The Department of Labor is pretty clear: you can't fund your kitchen's wages using the servers' tips while also paying the servers less than minimum wage.
What This Means for Other Restaurants
This case is a massive warning shot to the industry. Many owners try to bridge the pay gap between servers (who can make a lot in tips) and cooks (who usually have a flat hourly rate) by using tip pools.
If you're an owner, you have two choices:
- Pay everyone the full minimum wage (no tip credit), and then you can potentially share tips with the kitchen.
- Take the tip credit, but keep those tips away from the back-of-house staff.
You can't have it both ways. It’s legally "double-dipping," and as Barrio Tacos found out, the DOL is more than happy to sue to make sure workers get their due.
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Actionable Steps for Service Workers
If you think your workplace is doing something similar, you don't have to just sit there and take it. Here is what you should actually do:
- Track Your Own Hours: Don't just trust the POS system. Keep a log.
- Know Your Rate: If you see "tip credit" on your stub, make sure those tips are only going to servers, bartenders, or bussers.
- Check the Overtime: Your "time and a half" should be based on the full minimum wage, not your $3.75 base pay.
- Report It: You can contact the Wage and Hour Division at 1-866-4-USWAGE. It’s confidential, and they actually investigate these things.
The Barrio Tacos back wages lawsuit is a reminder that "the way we've always done it" isn't a legal defense. When the government steps in, the bill usually comes due with interest.
Actionable Insight: If you were an employee at the East Lansing, Grand Rapids, or Traverse City Barrio Tacos locations between 2020 and 2023, you may be entitled to a portion of this settlement. You can use the DOL’s "Workers Owed Wages" search tool on their official website to see if there is money waiting for you.