Federal court resolves 2023 Department of Labor suit against Hall Drive-Ins, Luke Hall

FORT WAYNE, IN – A federal lawsuit has recovered $178,000 in back wages, damages and penalties from Hall Drive-Ins Inc., operator of 10 Fort Wayne-area restaurants, to resolve U.S. Department of Labor litigation filed in 2023 in light of the employers’ violations of tip-pool requirements in the Fair Labor Standards Act. 

A consent judgment and order entered in the U.S. District Court for the Northern District of Indiana in Fort Wayne on September 4, 2024, requires The Factory Restaurant and Luke Hall to pay 28 employees $74,626 in back wages and an equal amount in liquidated damages to 28 employees and $28,748 in civil money penalties assessed by the department for the employer's violations. 

As part of the judgment, the employer has trained all managers – including those working at Hall Drive-Ins’ other restaurants – in federal wage laws related to the restaurant industry. The Factory Restaurant will also provide employees with fact sheets on their FLSA rights that detail specific wage laws for restaurant workers. 

The action follows an investigation by the department’s Wage and Hour Division that found Hall applied the federal tip credit, which allows him to pay servers hourly cash wages of $2.13 or $2.65 and rely on customers’ tips to make up the remainder of the employer’s minimum wage obligations. However, the employers invalidated the credit by operating an illegal tip pool for about a year by requiring servers to contribute a percentage of their tips to non-tipped kitchen staff and failing to tell servers they applied for the federal tip credit. 

The department filed a lawsuit in July 2023 in federal court alleging the employers violated the FLSA by operating an illegal tip pool and failing to maintain accurate wage records. The suit also alleged Luke Hall and The Factory Restaurant failed to pay servers the federal minimum wage because they deducted the cost of some servers’ mandatory uniforms and required servers to do unpaid pre-shift work 30 minutes before the restaurant opened and prevented them from clocking in until their first customer arrived. 

“The specific rules for the use of tip pools mandate that restaurant employers using the federal tip credit can only legally include employees who customarily and regularly receive tips in mandatory tip pools,” explained Wage and Hour Division District Director Aaron Loomis in Indianapolis. “The court’s action helps the U.S. Department of Labor restore these workers their rightfully earned wages after The Factory Restaurant and Luke Hall refused to pay them even though the Wage and Hour Division’s investigation led them to change their business practices immediately to comply with the law.”

“The resolution of this court case should remind employers that employees must be paid for all work they do, even if they aren’t clocked in,” added Regional Solicitor of Labor Christine Z. Heri in Chicago. “This case’s outcome shows how the department fights for workers and holds employers accountable to federal law.” 

The department’s Restaurant Employment Toolkit explains wage laws for the industry.

One of 10 food service establishments owned by Hall Drive-Ins Inc., The Factory Restaurant was founded in 1972 and today is part of a restaurant enterprise founded by Don Hall that includes The Deck, The Gas House, Hall’s Hollywood, Takaoka of Japan, The Tavern and Triangle Park in Fort Wayne, Hall’s Prime Rib Restaurant in East State Village, and Tap Haus and Hall’s Commissary in New Haven. Only The Factory Restaurant was a defendant in the department’s lawsuit.

Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division and how to file an online complaint. For confidential compliance assistance, employees and employers can call the agency’s toll-free helpline at 866-4US-WAGE (487-9243), regardless of where they are from. The division can speak with callers in more than 200 languages.