GREENFIELD — Tito’s Taqueria LLC paid a total of more than $137,000 to the U.S. Department of Labor after an investigation found that the restaurant illegally required employees to share their tips with management and did not pay employees working more than 40 hours a week at the state-mandated overtime rate.

The restaurant paid $62,452 in back wages and withheld tips in an administrative settlement with the Department of Labor, as well as an equal amount in liquidated damages to 126 affected employees across the business’ three locations in Greenfield, Keene, New Hampshire, and Brattleboro, Vermont. The company also paid $12,214 in civil penalties to the Department of Labor to resolve its violations.

“The violations by Tito’s Taqueria to shortchange workers by misusing their tips to pay managers is a problem we commonly find in the restaurant industry,” Steven McKinney, district director with the U.S. Department of Labor’s Wage and Hour Division, wrote in a statement. “The Fair Labor Standards Act forbids employers from keeping employees’ tips for any purpose, whether directly from customers or through a tip pool.”

Restaurant owner Tito Garza said in a phone interview Monday that he did not know the restaurant was violating labor policies. He said he was not aware that managers could not share in tips and he included them in the credit card tip pool based on hours worked.

“We falsely allowed managers, who work on the floor 80% or more of the time, to take part in the tip pool, which is understandable because our managers do dishes, they cash out customers, they roll burritos, they do online orders and they work very hard. It was just a faulty assumption that they could be in the tip pool,” Garza said.

Discussing the overtime violation, Garza said he had two managers he thought were salaried employees and were not required to receive overtime compensation. However, he said it was determined that the managers did not oversee enough full-time employees to be exempt from overtime pay.

“If two managers open up together, which is pretty common in our smaller local establishment, they don’t count as managing each other,” Garza noted.

Garza began his business as a Greenfield taco truck in 2016, and three years later, he opened his first brick-and-mortar location on Federal Street. Now that his business has grown to feature restaurants in three different states, Garza said Tito’s needs to bring on more professionals to ensure compliance with workplace laws. He said the restaurant chain, since the Wage and Hour Division’s investigation, has hired a full-time human resources representative.

“I started a business on the side of the road with an ice chest and some heated-up bricks. I think the lesson that I’m learning is that I’m no longer that guy, and now we have three locations. I need to make sure that everything that we do has been checked and rechecked by professionals,” Garza said. “My whole journey of business and life has been one of growth, and we try to learn things the easier way, but sometimes it’s not in the cards, and you’ve got to learn the hard way.”

Anthony Cammalleri can be reached at acammalleri@recorder.com or 413-930-4429.