Abdul Jamil Khokhar, owner of nine Papa John’s franchises in NYC, was sentenced to 60 days in jail and ordered to pay $230,000 in restitution for failure to pay his employees overtime.
Attorney General Schneiderman announced the conviction and sentencing, saying, “Wage theft is a crime and a Papa John’s franchisee is now going to jail for cheating his employees and trying to cover it up. My office will do everything in its power to protect the rights of New York’s workers and make sure that all employers – including fast food restaurants – follow the law.”
Mark H. Watson, Jr., Regional Administrator for the Wage and Hour Division at the U.S. Department of Labor said, “The Attorney General’s successful criminal prosecution of this employer, together with the Department of Labor’s civil consent judgment against the enterprise, show that employers will not get away with covering up violations of state and federal wage laws. We will continue to work together to prevent such law-breaking and obtain proper compensation for workers.”
You hear that, salon owners? This is as strong a warning as you’re likely to get.
These laws aren’t specific to New York. Federal laws require employers to pay workers at least the prevailing minimum wage for all hours worked, and overtime at one-and-one-half times their regular rate of pay for hours worked in excess of forty in any given workweek. Employers are also required to report all wages paid to employees on tax returns.
Khokar failed to pay overtime to his workers, instead paying them the regular rate of pay for all hours worked, including overtime. He created fictitious names for employees to use in the computerized timekeeping system to hide this practice and filed fraudulent tax returns that omitted the cash payments made under fictitious names. Clearly not a particularly bright bulb, Khokar implemented these practices after becoming aware that he was under investigation by the DOL for wage violations.
“See that fire? Let’s try and put it out with some gasoline.”
The DOL and the New York Attorney General’s office worked together to jointly investigate and prosecute Khokhar–a perfect illustration of the “hell-trifecta” I’ve mentioned previously, where both state and federal agencies will tag team exploitative employers for maximum damage.
New York and the Department of Labor are broadcasting a loud warning. Heed it.
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I recently decided to take over a failing booth rental salon. I have a girl who is both a hair stylist and a nail tech. She wants to rent a booth but she also wants to do nails there and I supply the materials I am confused how to handle this situation. She would like a flat fee, any suggestion on how to handle this without muddying the lines of independent contractor
She’s trying to have her cake and eat it too. Unfortunately, this puts you in a dangerous legal position, and puts her in the position to gain the most from the arrangement. She needs to make a choice: she’s either an employee or a self-employed booth renter. She cannot have it both ways, and there’s no scenario where it’s advisable or beneficial for you to allow her to function as both simultaneously.
You should read this post about the differences between booth renters and employees.
Read this post about why booth rental salons SUCK.
Read this post about the 20 factors the IRS uses to determine whether a worker is truly self-employed.
Print this article out and make her read it so she understands how ridiculous her demands are.
And then hit the search bar and type in “booth renter” to get more information on how to manage a booth rental salon without a.) going insane or b.) breaking the law.
If the previous owner permitted that kind of behavior, it’s not surprising to me at all that the salon was failing.
When not behind the chair, I am a business coach for booth renters & salon owners. I have sat in on 13 stylist/owner court cases throughout the Midwest including my own case in which I was misclassified by an owner. (TONS of thank you’s to you, Tina, bc if I hadn’t stumbled upon one of your articles at 2:30 on morning I would probably still be at the same salon) In those cases I have seen owners required to pay $100,000s in back taxes, slapped with backwages, & $1,000 fine per stylist. Oh! And charged with felonies. It’s no joke & the IRS, FLSA & DOL will eventually catch up & when they do you’re going to have to deal with all 3 of them bc they work together to fight misclassificatin.
Good! I never personally attend proceedings. A good deal of my consulting clients are salon owners (and attorneys who represent salon owners) who unintentionally misclassified and/or committed wage theft in other forms, so I work with them to hopefully ensure they never end up in court or in any kind of disciplinary hearings in the first place by helping them apply for various forms of amnesty (whether that’s through the VCSP or mediation with the affected employees). Usually, we’re able to handle things proactively–before the IRS, DOL, or state labor authorities have even become aware that violations were occurring.
The ones who are in crisis, dealing with enforcement actions–there’s very little that I or anyone else can do for them other than work with their attorneys to restructure their employment practices and compensation to ensure they have a profitable business to go back to when the dust settles. Once they’re caught, it’s very much out of everyone’s hands. :/
I’m decided to make my salon booth rentals, do they need their own liability insurance and business license while their conducting business in my salon, do they also need to only be here during my salon business hours, do I need to give them a salon key, what kind of insurance should I have in case of Their clients or the booth renters try to Take me to court??
I would recommend requiring them to carry their own PLI policies. As for the business licenses, that depends on your state regulations. Some states require renters to have facility licenses, business licenses, tax licenses, etc–but those are location-specific, so you’ll have to do your own research on that.
You can’t require them to work a schedule, but it’s normal and legal to set facility hours at the time of contract signing, promising that the building will be open and available to them between certain hours on the operating days you establish. However, once you set those hours, you are obligated to ensure the building is accessible. Failure to do so could constitute a breach of contract.
No insurance will keep a client or renter from suing you, but you need to have general liability insurance (GLI) to cover any incidents that occur on your property (slips and falls, etc.). You can also carry a professional liability insurance policy (PLI) to cover malpractice, but you aren’t legally obligated to and it really isn’t even necessary, since the renters are not your employees and you have no right to dictate their practices or oversee their work.