Cedar Rapids restaurant fined by U.S. Department of Labor for improper tip pool

CEDAR RAPIDS — The U.S. Department of Labor has ordered a Cedar Rapids cafe to pay back tens of thousands of dollars in wages, plus pay damages, after finding that its management pooled tips improperly for years.

The department’s investigation concluded that Lu’s Deli, 1010 Third St. SE, had been improperly distributing tips among management for at least two years, from September 2021 to September 2023. The investigation was launched in September 2023 by a complaint from a former employee after workers there found documents indicating owner Laurie Konecny was including herself in the tip pool.

The allegations, substantiated by the investigation, ordered Lu’s Deli to pay $29,456, including over $14,000 in back wages and $14,000 in damages to 19 employees. The cafe also was ordered to pay a penalty of $1,325 to the Department of Labor.

All back wages, damages and penalties have been paid, the department said.

Last year, now-former employee Cara Angellotti and her co-workers discovered a stack of paystubs for Konecny on a supply closet shelf. On the paystubs, Angellotti said, there were lines for tips Konecny received, even during pay periods when the owner was on vacation.

It is illegal in the United States for employers, including managers and supervisors, to keep any portion of tips for any purpose, whether directly or through a tip pool. An employer may not require employees to give a portion of their tips to employers or management, even if they receive minimum wage.

Employees at Lu’s Deli, who had the understanding tips were split equitably based on hours worked, noticed large differences in tip distribution among their own paychecks.

“I think we were all pretty shocked,” Angellotti told The Gazette. “A couple of us worked the exact same hours each week, and tips on our paychecks were anywhere from $100 to $150 different.”

Angellotti earned $12 per hour in her time working there from March to October. Her last paycheck at the cafe had about $160 in credit card tips for a 45-hour pay period. She said some employees at the restaurant made as little as $9 an hour.

“The only thing (Konecny) told me when she hired me is that credit card tips are divided between employees based on hours worked,” she said. “At one point (another employee) said something to her about not receiving tips, and from then on they’d get $5 to $10 per paycheck.”

The Labor Department’s Wage and Hour Division normally conducts investigations over a two-year period, though she alleges the improper tip collection had been going on longer.

Comments: Features reporter Elijah Decious can be reached at (319) 398-8340 or elijah.decious@thegazette.com.