The local operator of 19 Dairy Queen locations in the San Antonio area violated U.S. labor law and must pay more than $350,000 in back wages and interest, a federal court has ruled.

R&S Dairy Queens, based out of New Braunfels, failed to pay overtime wages to salaried managers and failed to provide a last paycheck to some, according to the findings of a U.S Department of Labor investigation that were affirmed by the federal court in San Antonio. The issues affected 31 managers.

R&S had classified managers as salaried workers exempt from overtime pay. But the Labor Department found that R&S’ salary for these workers was not high enough to exempt them from the overtime pay required by the Fair Labor Standards Act (FLSA). Overtime pay is legally set as at least one and a half times normal wages for every work hour in a week above 40 hours.

“Employers cannot avoid overtime requirements by simply giving an employee a title and paying them a salary,” said Wage and Hour District Director Cynthia Ramos in San Antonio in a prepared statement. “Most employees — even those paid a fixed salary or flat amount per day or shift — are entitled to overtime unless specific FLSA requirements are met. We encourage other employers to review their pay practices, and to contact us with questions to avoid similar violations.”

The U.S. District Court for the Western District of Texas in San Antonio ordered R&S in a consent judgment to pay $358,200 in back wages and interest to the managers. It also issued an injunction prohibiting R&S Dairy Queens, which employs approximately 350 full and part-time workers, from future violations of the Fair Labor Standards Act’s overtime and recordkeeping provisions.

One of the managers listed in the order as entitled to back pay, Stephen Stewart, works at the store at 7922 Culebra Road. He said he was not aware of any Labor Department investigation or any court order. He said the store pays its wage employees overtime but that managers, in addition to their salary, are paid bonuses intended to offset any overtime work.

“At our franchise, we take care of our employees,” he said. But, he allowed, “if they send me a check, I’ll have a smile on my face.”

R&S said in a statement that it values the skills and expertise of its managers, and “we would never knowingly deny them their due compensation.”

The company said its managers are “extremely well compensated, many making in excess of $80,000 per year.” It said that although a routine audit by the Labor Department had found the company to be in compliance, a subsequent examination found a “technical violation that was in conflict with prior guidance.”

The company, founded in 1980, said it has since revised its compensation structure to comply with the department’s “most recent guidance.”

The statement concluded: “We highly recommend businesses in San Antonio review their wage and hour practices to ensure continued compliance as work schedules have dramatically changed the past year.”

For salaried workers to be exempt from overtime pay under federal law, they must make at least $684 a week, or $35,568 annually. Before 2020, the threshold was lower — $455 per week, or $23,660 annually. Bonuses and other incentive pay can satisfy up to 10% of the standard salary test requirement.

The issue isn’t new.

In September, the Labor Department announced it had found three pharmacy operators had failed to pay overtime wages for 28 workers.

An analysis of data provided by the Labor Department’s Wage and Hour division shows that employers in Bexar County zip codes have paid roughly $23.3 million in back wages since 1997.

Waylon Cunningham

Waylon Cunningham writes about business and technology. Contact him at waylon@sareport.org.