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Lawsuit slams Dotty's 'kickback'

Class-action filing says lottery deli broke minimum-wage laws


by: TRIBUNE PHOTO: CHRISTOPHER ONSTOTT - Former Dotty's manager Patrick Burns handled several thousand dollars a day in cash at the lottery deli, and sued when the company charged him for cash shortfalls. His lawyer argues the practice violated the state minimum wage law. A Portland attorney is suing the state’s largest lottery retailer, alleging that it routinely violated Oregon’s minimum wage law.

Attorney Paul Breed claims that Oregon Restaurant Services Inc., which owns the lucrative Dotty’s deli chain, illegally forced minimum-wage employees to pay “kickbacks” to cover shortages in the cash register at the end of their shifts.

“Employees were required to pay kickbacks regardless of the reason for the shortage, regardless of fault and regardless of the impact of the kickback on the employee’s earnings over the pay period,” Breed contends in a Feb. 15 complaint filed in Multnomah County Circuit Court. Those employees were not granted any corresponding credits when the cash register had surplus funds, Breed says.

Former Dotty’s employee Kim Juarez, who worked there from May 2008 to August 2010, lost an estimated $500 to $1,000 a year while earning minimum wage, Breed says.

He wants a Portland judge to certify the case as a class-action suit, which could involve at least 200 other Dotty’s employees, Breed estimates.

Oregon Restaurant Services denies its practices were illegal, and will vigorously defend the claim, says Jeff Chicoine, an attorney for Miller Nash in Portland, who represents the lottery retailer. The company’s policies were no different from those typical of the restaurant industry, he says.

However, Oregon Restaurant Services changed its policy in 2011, Chicoine says, in response to earlier litigation, including a lawsuit brought by Breed on behalf of former Dotty’s employee Patrick Burns.

“We no longer accept repayments on cash shortages,” Chicoine says.

Now the company uses a different approach, involving counseling and discipline, for workers when the cash register shows shortfalls, he says.

Dotty’s pioneered the “lottery deli” format in Oregon. The small stores derive most of their profits from six state-owned electronic slot machines, selling food, alcohol and cigarettes — often at cut-rate prices — to lure gamblers.

Burns, who worked for Dotty’s in Gresham and elsewhere from 2008 to 2010, says he would handle thousands of dollars per shift, all in cash because the lottery retailer doesn’t take checks or credit cards.

“Anybody handling cash, you’re human, you’re going to make a mistake one way or another,” he says. “I would do anywhere from $8,500 to $13,500 a day is what I handled.”

Burns would unload money from the six Oregon State Lottery machines plus the cash register at the bar. He would dole out cash prizes to those gamblers who left with winnings, sell drinks and occasional food, keno and other lottery tickets, and lots of cigarettes.

“Sometimes we would do $1,000 a day in cigarettes,” he says, “because we had the cheapest cigarettes in town.”

Other retailers would come in to buy the maximum five cartons of cigarettes, he says, and then mark up the price to sell at their stores.

Onerous cost of litigation

Burns didn’t mind reimbursing Dotty’s when his till came up short a few cents or dollars at the end of the day. But then the company started accusing him of being $50 or $100 short, and making him pay that amount back.

“I said this couldn’t happen; there’s no way it could be an even $50 short, or an even $100 short,” Burns says. “To the best of my knowledge, it was not money I was legitimately short for.”

He says he was fired after raising a fuss, but later sued and received an $8,800 out-of-court settlement.

His attorney, Breed, says making an employee cover the cost of shortages in the cash register is no different than having them pay the shop’s electric bill.

Dotty’s never deducted the payments from workers’ pay, so they were legal, Chicoine says. Besides, he says, the employees weren’t really making minimum wage because they also get tips.

The Oregon Bureau of Labor and Industries, which enforces Oregon’s minimum wage law, begs to differ.

Under state law, tips don’t count toward the minimum wage. In fact, the Oregon Restaurant and Lodging Association has long lobbied the Legislature to allow “tip credit,” so tips could count toward the minimum wage, $8.95 an hour.

No Oregon employers are allowed to deduct money from workers’ wages to cover shortfalls in the till, no matter how much they earn, says Christie Hammond, deputy director of the state labor bureau, known as BOLI. Employers may ask workers to make payments to defray the costs of shortfalls only if they earn more than minimum wage, or the cost wouldn’t cause their wages to fall below minimum wage, Hammond says.

So what are restaurants and other retailers to do when they want to hold employees accountable for missing money in the cash register at the end of the day? Employers have other legal recourse if they think an employee is stealing from them or otherwise losing money, Hammond says. “But they shouldn’t be the judge and jury to decide if the employee is guilty of the shortage.”

by: TRIBUNE PHOTO: CHRISTOPHER ONSTOTT - Dan Fischer (left), owner of the Dotty's chain, has hired security guards at the Hayden Island Lottery Row businesses. Fischer declined to comment on the new employee lawsuit about docking pay when cash register tallies come up short.Though Oregon Restaurant Services insists it never violated the law, it made the policy change in part due to Burns’ case. “They simply decided, given the onerous cost of litigation, it didn’t make sense to continue the practice,” Chicoine says.

There are at least 33 Dotty’s in the Portland area, plus other lottery retailers owned by the company. Six of the 12 lottery retailers at a Hayden Island retail strip center are owned by Oregon Restaurant Services, including one Dotty’s.

Breed says he’s pleased Oregon Restaurant Services has halted the practice of charging employees for cash-register shortfalls. However, he says the company is still liable for damages to affected employees.

“The statute of limitations is six years, so there’s still a pretty large group of people,” Breed says.