Five Tips To Avoid Restaurant Pay Lawsuits

In handling over 100 restaurant pay lawsuits, I have seen common themes play out, whether that restaurant is a mom and pop take out place or a high end fine dining establishment. From the perspective of someone who has collected millions of dollars for restaurant workers across the United States, here are my top five tips to avoid wage theft lawsuits. 1. Tips Are the Property of Servers From the management point of view, think of tips as kryptonite – stay away. It is not your money. Many of the lawsuits against restaurants arise from management dipping into gratuities left by customers for their servers. Tips are not house money. Owners need to make sure that tips are only shared with waiters, waitresses, bussers, runners, and other front of the house workers who deal with customers. And, managers need to stay out of the tip pool as well. The temptation to dip into the tips of servers – some of whom may be making a six-figure income – often times is irresistible for an owner. Taking 5% off of the pool, sharing tips with the kitchen, putting a manager in the tip pool, and having servers kick in cash every shift for a dishwasher to scrape plates, are all examples of skimming of tips that have resulted in lawsuits. Keep in mind that the penalties for skimming tips are severe, as the restaurant may have to disgorge the tips, lose the tip credit, and be subject to liquidated damages. 2. Paying Salary or Shift Pay = Lawsuits Unfortunately, there is a common misconception that if you pay an employee on a salary, you don’t have to pay overtime. This can be a catastrophic mistake. The fact is that only a limited amount of employees in restaurants are “exempt” from the requirement of overtime under the federal Fair Labor Standards Act (FLSA) and the New York Labor Law. In order to qualify as an “exempt” job under these laws, a restaurant worker has to fit within the administrative, executive, or professional exemption. So, if you are paying your cook, maître’d, bookkeeper, host or other non-management employee a salary for a workweek in excess of 40 hours, you are unlawfully failing to pay them overtime -- regardless of how much they are paid. Likewise, regardless of how much you pay an employee for shift pay, if that employee works more than 40 hours per week, the restaurant has broken the law by not paying him or her time and one-half for all hours worked over forty. 3. Keep Track of Work Hours Restaurant pay lawsuits usually involve some sharply contested claim that employees are not paid for all hours worked. Do the kitchen workers take a break between lunch and dinner rush? Do waiters clean up for a half hour after they close out of the POS system? What is the start time, stop time, break time, lunch time? If a restaurant is not keeping track of hours worked by employees in either the front of the house or the back of the house, then it risks claims for unpaid hours. Both the FLSA and the New York Labor Law require employers to keep time and pay records of their employees. In this regard, it is important to note that in the Mt. Clemens case the Supreme Court held that where the employer keeps inadequate records, there is a presumption that the employee’s recollection of hours worked should be believed. 4. Know Your Restaurant Pay Math Many restaurants get caught up in “gotcha” violations because they do not keep track of the specific wage rates for their workers. Here is a checklist for current restaurant pay requirements in New York o Minimum Wage for non-tipped employees, including back of the house, is $8.75 per hour and $13.13 per hour for overtime hours. o Tipped Minimum Wage for front of the house is $5.00 per hour and the tip credit is $3.75. The overtime rate for front of the house is $9.38 per hour. (You can only take the tip credit once). o Tipped Minimum Wage for delivery workers is $5.65 and the tip credit is $3.10. The overtime rate for delivery workers making tipped minimum wage is $10.03 per hour. o Uniform Maintenance for workers that work over 30 hours a week is $10.90; 20 -30 hours a week is $8.60; and less than 20 hours a week is $5.20. o Meal Credits for front of the house and delivery workers is $2.50 and for back of the house workers is $3.00. o Restaurants may deduct the cost of converting a tip left on a credit card to cash, but only may deduct the pro-rated share of the charge levied by the credit card company. o All restaurant employees that work a spread of hours that exceed 10 hours on any day must receive an additional $8.75 in spread of hours pay. 5. Respect, Respect, Respect A large portion of workers who sue their boss for wage pay violations visit an attorney because they believe they were the victims of an unlawful termination or wrongful discharge. Although that claim is generally DOA because employees in New York are “at will,” the inquiry leads to the follow-up question of “But how were you paid?” If that worker was paid incorrectly, and the employee believes he has been mistreated, a lawsuit will follow. However, there are many occasions where employees with excellent claims for back pay do not want to sue because the owner always treated them with respect and they believe they were paid fairly, albeit incorrectly. On the other hand we have seen lawsuits where some of the highest paid servers in New York have sued because they were treated disrespectfully, called names, and talked to in a demeaning manner. Restaurant owners in New York are right to believe they are under siege, but it is a misconception that every employee has a goal to bring a public lawsuit. Sometimes, treating employees with respect can make the difference in whether your cook or waiter has the word “plaintiff” before his name.   _________________________________________________________________________ *These comments were prepared for the New York City Hospitality Alliance program on February 2, 2015, Have We Reached the Tipping Point for Tips?