The New York Post reported on the growing trend of delivery worker lawsuits where food-delivery services are “stiffing” their workers to remain competitive. Louis Pechman, founder of waiterpay.com, was quoted in the article.
The U.S. Department of Labor and Sonic Drive In, the nation’s largest drive-in restaurant chain have signed a voluntary agreement to help Sonic’s 3,000+ drive in franchise locations comply with federal labor laws. Sonic has been one of a number of fast food restaurants that have been hit with wage theft lawsuits complaining that workers have had their time shaved, did not get overtime after 40 hours, and were required to work “off the clock.”
The Department of Labor announced, “We encourage other franchisors to follow Sonic’s example and take similar steps to benefit their franchises’ employees and owners by complying with the law… Abiding by the law makes better business sense than facing the prospect of paying back wages, damages, and penalties for violations of the Fair Labor Standards Act.”
The Department of Labor will provide easy-to-use compliance assistance tools designed for the franchise restaurant industry. The package will include video and online training, educational articles for use in internal company publications, and sample training materials for use in company staff meetings. The Department of Labor will also make representatives available to provide training and labor law compliance assistance to Sonic franchisees.
The Fair Labor Standards Act requires that fast food workers be paid at least the federal minimum wage of $7.25 per hour (note that New York has a higher minimum wage) as well as time-and-one-half their regular rates for every hour they work beyond 40 per week. Fast food restaurants and many chain restaurants have been sued recently for violating workers’ rights by failing to pay overtime and by forcing employees to work “off the clock.”
The United States Department of Labor announced that it will revoke an Obama-era regulation prohibiting restaurants from pooling customers tips with back-of-the-house workers. Although this change could have a significant impact in many areas of the country, New York State still has restrictions on who can participate in a tip pool.
The Legal History
Unless state laws require higher amounts, as is the case in New York State, the Fair Labor Standards Act (“FLSA”), a federal law, requires employers to pay employees at least the federal minimum wage rate of $7.25 per hour worked. The FLSA allows restaurants to pay employees who regularly receive tips as little as $2.13 per hour if they make the difference (i.e., $5.12) per hour in tips. The $5.12 difference is known as a “tip credit,” which is a privilege that the FLSA gives to restaurants. The FLSA also allows restaurants to require tip-receiving employees to pool their tips for distribution among employees.
Before 2011, there was much debate about which employees could participate in a restaurant’s mandatory tip pool. Some courts concluded that only employees who regularly receive tips and who spend at least 80% of their time serving customers at tables, known as “food service employees,” could participate in a tip pool. These courts concluded that if a restaurant forced food service employees to share their tips with non-service employees, such as cooks or other back-of-the-house employees, then the restaurant violated the FLSA and had to pay back tips and other wages to the food service employees. Other courts reached the opposite conclusion. They reasoned that any employee should be allowed to participate in the mandatory tip pool as long as the restaurant did not take a tip credit and, instead, paid its employees the full minimum wage rate ($7.25 under federal law, but higher under New York State law).
In 2011, the US Department of Labor enacted a regulation that back-of-the-house employees cannot participate in a tip pool with front-of-the-house food service employees regardless of whether the restaurant takes a tip credit. The 2011 regulation mirrors the New York Labor Law and the New York State Department of Labor’s Hospitality Wage Order, which limit tip pooling to food service employees only. In New York, back-of-the-house employees can never participate in a mandatory tip pool with front-of-the-house food service employees.
The Recent Change and Effect in New York
Under the Trump Administration, the US Department of Labor has announced that it will revoke the 2011 regulation. The effect of this revocation is that in many areas of the country, but not in New York, restaurants that do not take a tip credit can require front-of-the-house employees to share their tips with any other restaurant employee. Note that, restaurants that take a tip credit against front-of-the-house food service employees still cannot require them to share their tips with back-of-the-house workers.
These changes at the federal level have no impact in New York, whose laws and regulations already require that tips left by customers be given to front-of-the-house employees. Under New York laws, food service employees can be required to share their tips only with other food service employees. For example, a tip pool in a New York restaurant is lawful if it is composed of non-managerial bartenders, servers, bussers, and runners. However, it would be unlawful for a New York restaurant to require servers and bartenders to share tips with a cook or manager.
Dan Barber’s Blue Hill restaurant has agreed to pay its waitstaff $2 million to settle an unpaid wages and tip theft lawsuit.
Recognized by Eater as the Best Restaurant in America for its locally-sourced farm-to-table cuisine, Blue Hill at Stone Barn and its sister restaurant in Manhattan was sued by two former servers in 2016 on behalf of themselves and all servers, bussers, bartenders, runners, and hosts and hostesses. In their lawsuit, the servers claimed that Blue Hill required them to share their tips with expeditors, who were kitchen employees that did not interact with the restaurant’s customers. The servers argued that this tip pooling system was unlawful. Under the law, waitstaff should not be required to share their tips with restaurant employees who do not interact with customers, such as kitchen employees.
Attorneys for the workers also claimed that whenever there was a private event or banquet at Blue Hill, the restaurant led customers to believe that the “service” or “administrative” fee that they paid was a tip that would be distributed to the waitstaff. According to the servers, Blue Hill unlawfully pocketed all service charges that customers paid, even though those amounts should have been given to the waitstaff as tips.
The wage theft lawsuit claimed that Blue Hill did not pay them minimum wages, as required under New York State law. Because Blue Hill required the waitstaff to share tips with kitchen employees, like expeditors, in an unlawful tip pool, the restaurant could not pay waitstaff at a reduced minimum wage rate and take a tip credit. Normally, if a restaurant meets several legal requirements, it may pay employees who regularly receive tips at a reduced hourly wage rate. The restaurant loses this privilege if it pockets any part of the waitstaff’s tips or creates an unlawful tip pool. For this reason, the servers claimed that they were owed the difference between the reduced hourly rates they were paid and the full minimum wage rates in New York.
Since the settlement, Blue Hill has eliminated tipping at its restaurants, a growing trend among New York restaurants.
A wage theft lawsuit claims the Times Square location of Buca di Beppo, a nationwide Italian restaurant, failed to pay its workers minimum wages and overtime pay in violation of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law. According to a former server, Buca di Beppo maintained a policy of cheating its servers, bussers, and bartenders out of their wages by requiring them to clock out and continue working unpaid and off the clock, as well as refusing to pay them spread of hours pay when the length of their workday exceeded 10 hours.
According to the former server, Buca di Beppo required him to record his time using the restaurant’s point-of-service system, but did not allow him to accurately keep track of his hours. He alleges that whenever he worked a double shift, Buca di Beppo required him to clock out for 30 minutes between shifts, even though he continued to work at the restaurant during that time. When working the double shifts, the server claims his workday exceeded 10 hours, yet he never received spread of hours pay of an additional hour of pay at the minimum wage rate.
The class action lawsuit states that the server regularly worked more than 40 hours per week, yet whenever he worked more than 28 hours in a week, the restaurant would roll back and adjust his hours worked by reducing the hours on his time records. It’s further claimed that Buca di Beppo shaved time by requiring the server to arrive at work two hours before the start of his shift to perform unpaid, off-the-clock work.
A SUBWAY restaurant located in Times Square has paid $42,500 to a sandwich preparer to settle a lawsuit alleging that the popular sandwich chain did not pay him overtime pay, in violation of the Fair Labor Standards Act and the New York Labor Law. The lawsuit was filed against the individual franchise restaurant, as well as the SUBWAY corporation.
The sandwich preparer, also referred to within the Company as a “sandwich artist,” alleged that he worked up to 60 hours per week making sandwiches and preparing toppings, and was not paid overtime pay. The lawsuit also alleged that a store manager regularly took tips from a tip jar meant for the sandwich preparers. Federal and New York State law provides that an employer must pay overtime pay to its non-exempt employees, and that employers may not take a share of gratuities left by customers to food service employees. The sandwich artist also claimed that SUBWAY did not give him required wage notices and correct wage statements.
This is not the first time that SUBWAY has been hit with a wage lawsuit. In fact, as of 2014, SUBWAY restaurants violated the wage payment laws more than any other fast food restaurant. Indeed, in July 2016, SUBWAY entered into a SUBWAY Agreement with USDOLwith the U.S. Department of Labor’s Wage and Hour Division to promote and achieve compliance with labor laws.
Vivianna Morales, an attorney with Pechman Law Group, was the lead attorney on behalf of the worker at SUBWAY.
Two assistant managers who worked at a North Carolina Bojangles’ restaurant are suing the famous southern food chain for failing to pay them overtime. The assistant managers argue that they were not actually managers and spent most of their time cleaning, taking orders, serving customers, and preparing, cooking, and packaging food. Although they worked approximately fifty hours per week, Bojangles’ always paid the assistant managers the same set salary every week.
The law requires employers to pay employees overtime pay for hours worked over forty per week. Overtime pay is equal to one and one-half (1.5) times an employee’s regular hourly rate of pay. Employers can get in trouble with the law when they pay employees on a fixed weekly salary, because it does not cover overtime pay.
If several requirements are met, managers fall under an exception to the law and do not have to be paid overtime. To fall under the exception, a restaurant “manager” must perform certain duties, such as directing the work of other employees, setting employees’ pay rates and work schedules, hiring and firing employees, and recommending the promotion or demotion of employees. Managers should also have the power to act on behalf of the restaurant by, for example, ordering food on its behalf. An employee who does not perform these duties and is simply called a “manager” or “assistant manager” does not fall under the exemption and must be paid overtime. This is known as “misclassification.”
The Bojangles’ assistant managers claim that they were misclassified because they were paid a fixed weekly salary even though they did not perform the work duties of true managers. Accordingly, they argue that Bojangles’ owes them and 400 other assistant managers unpaid overtime wages. The lawsuit is pending in federal court in North Carolina.
Two former banquet servers at Pier A Harbor House banquet hall in New York City claim that Pier A unlawfully failed to pay its banquet servers and bartenders the minimum wage in violation of the Fair Labor Standards Act (“FLSA”) and the New York Labor Law.
The collective and class action lawsuit, filed in federal court in New York, alleges that Pier A paid its banquet servers and bartenders at the tipped minimum wage, currently $7.50 per hour in New York, while requiring them to share their tips with non-service employees. The servers bringing the lawsuit claim that Pier A charged customers a “Service Fee” equal to 18% of the food and beverage costs of an event, and required its tipped workers to share a portion of this amount with porters. Porters are back of house employees who provide little to no direct customer service, and are therefore not permitted to participate in tip splitting with front of house workers. Under the FLSA and New York Labor Law, employers lose the privilege of paying workers a tipped minimum wage when they require tip sharing with workers who are not entitled to tips, such as porters or other back of house workers. The servers also say Pier A never gave its tipped workers notice of its intent to use the tip credit provision.
According to the lawsuit, Pier A also required banquet servers and bartenders to spend more than 20% of their workdays performing non-tipped side work. For example, during typical banquet events that lasted four hours, Pier A required tipped workers to arrive 2 hours early to set up the dining room and to remain for about 2 hours after the event was over to disassemble to room.
Under the FLSA and New York Labor Law, employers are allowed to take a “tip credit” and pay servers, bussers, bartenders, and other front of the house workers below the federal minimum wage. The United States Department of Labor regulations provide, however, that a restaurant will not qualify for the “tip credit” for workers that spend more than 20% of their time performing non-tipped work.
A produce market and a restaurant at Reading Terminal Market will pay $660,117 to settle overtime claims. The settlement is for back wages and liquidated damages for 140 present and past workers to resolve violations of the federal Fair Labor Standards Act.
Department of Labor investigators found that Iovine Brothers Produce and Molly Malloy’s restaurant, which operates out of the Reading Terminal Market in Philadelphia, Pennsylvania, violated the overtime and recordkeeping provisions of the FLSA. The investigation determined that the companies failed to pay overtime at time-and-a-half when employees at the produce market and restaurant worked more than 40 hours in a workweek. Instead, the employer paid for the overtime hours at straight time rates, in cash. The failure affected regular hourly employees, and tipped employees, such as servers and bartenders. The employer also failed to maintain some of the payroll records required by law. A civil money penalty of $62,007 was assessed due to the willful nature of the wage theft violations.
“For workers in the restaurant and service sectors, money earned through overtime can make a big difference to their livelihood,” said a Department of Labor spokesman. “For employers in this competitive industry, maintaining a level playing field is critical. Our top priorities are to ensure that workers are aware of their rights, and to help companies come into compliance with the law.”
The federal FLSA requires that covered, nonexempt employees be paid at least the minimum wage of $7.25 per hour ($11.00 per hour for workplaces with more than 10 workers in New York City), for all hours worked, plus time-and-one-half their regular rates for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records.
An IHOP franchisee restaurant on Staten Island, New York will pay $40,000 to a former assistant manager to settle a lawsuit for unpaid overtime wages. The assistant manager claimed that IHOP failed to pay her overtime wages for hours worked over forty per workweek. This lawsuit continues a recent trend of restaurant workers alleging misclassification as Assistant Managers so they would be “exempt” from the FLSA requirement to receive overtime pay at time and a half for hours worked over forty in a workweek.
Only a limited number of employees in restaurants are “exempt” from the requirement of overtime pay under the federal Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL). In order to qualify as an “exempt” under these laws, a restaurant worker has to fit within the administrative, executive, or professional exemption. So, if a restaurant is paying a cook, maître’d, bookkeeper, host, or other non-management employee a salary for a workweek in excess of 40 hours, it is unlawfully failing to pay the employee overtime — regardless of how much the employee is paid.