Tip Credit

Haru Restaurants Sued for Forcing Waitstaff to Share Tips with Sushi Chefs

Haru Restaurants Sued for Forcing Waitstaff to Share Tips with Sushi Chefs

Haru restaurants in New York City, were hit with a tip theft lawsuit that claimed the restaurants had a tip distribution scheme where sushi chefs would receive a daily portion of the tip pool. The lawsuit claims that the sushi chefs did not perform personal service to customers at a level that is a principal and regular part of their duty and as a result they are not entitled to share tips under either the Fair Labor Standards Act (FLSA) or the New York Labor Laws (NYLL).

Attorneys for the workers also claim that servers, bussers, runners and bartenders were required to perform side work at the start, during, and at the end of every shift which amounted to more than 20% of their work time and an excess of two hours a day. The side work that these tipped employees were required to perform included cleaning bathrooms, sweeping, mopping, setting up and taking out garbage cans, filing soy sauce bottles, folding napkins and restocking. According to the wage theft lawsuit, the restaurants required the workers to perform most of the side work before the restaurant opened or after the restaurant closed and customers had left. Notably the tipped employees were required to come in at 10:30 am for a lunch shift when the restaurant didn’t open until 11:30 am.

Under the FLSA, employers are allowed to take a “tip credit” and pay waiters, bussers, and bartenders 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 employees that spend more than 20% of their time performing non-tipped work. Haru’s tipped employees are seeking to recover minimum wage, overtime wages, misappropriated tips and call-in pay.

Haru restaurants are part of a chain of sushi restaurants owned and operated by Benihana National Corp. They have previously been sued for discrimination against Hispanics and unpaid overtime and spread of hours.

Busser Sues Mario Batali’s Restaurant for Minimum Wage and Overtime Pay Violations

Busser Sues Mario Batali’s Restaurant for Minimum Wage and Overtime Pay Violations

A former busser employed by Mario Batali’s Babbo Ristorante Enoteca is suing the restaurant to recover minimum and overtime wages, and tips unlawfully retained by the restaurant. According to Octavio Quinones, who worked at Babbo as a busboy  for almost two years, the restaurant willfully failed and refused to pay him at the correct minimum wage and overtime rate, did not provide him with a written wage notice detailing his rate and frequency of pay, and forced the waitstaff to share tips with management.

During his shifts as a busser, Quinones would spend one and a half hours performing side-work, such as cleaning floors and folding napkins. Quinones was paid at the tipped minimum wage for all of his shifts even though he spent more than 20% of his time performing non-tipped side-work. According to the lawsuit, Babbo failed to notify front of the house workers at the beginning of 2017 that the proper full minimum wage was $11 and that it intended to take a $3.50 tip credit. According to the wage theft lawsuit, when Quinones earned overtime pay, Babbo also incorrectly factored in a tip credit.

Restaurants must provide notice before claiming a tip credit towards an employee’s wages. Under the Fair Labor Standards Act and the New York Labor Law, if an employee works over 40 hours per week, that employee must receive overtime pay. Sharing of an employee’s tips with a restaurant manager is strictly prohibited under the law.

Smokey Bones Restaurant Accused of Tip Credit Violations

Smokey Bones Tip Credit Wage Theft Lawsuit

Servers at Smokey Bones Bar & Fire Grill claim that the restaurant chain has engaged in tip credit violations and wage theft, according to a lawsuit filed in South Carolina federal court.

The lawsuit alleges that Smokey Bones, while taking advantage of the FLSA’s tip credit provision, required waitstaff to perform non-tipped side work that was not related to their tipped occupations as servers and bartenders, as well as required them to spend more than twenty percent  of their shifts performing non-tipped side work that was related to their tipped occupations. The servers allege that they were required to pay the restaurants out of their tips when a customer walked out, were required to purchase additional  Smokey Bones t-shirts with their tips, and were never notified that Smokey Bones was paying them less than minimum wage pursuant to the FLSA’s tip-credit provision. The waitstaff also allege that all three of those requirements violate the tip-credit provision.

In a May 31 decision, a South Carolina federal court ruled that conditional certification of a nationwide class of servers and bartenders was warranted. The court held that the waitstaff produced evidence of nationwide Smokey Bones job descriptions for servers and bartenders that on their face require side work. While the court ruled, there is no doubt that requiring side work does not necessarily violate the FLSA, the waitstaff made a sufficient showing that Smokey Bones’ nationwide side work policy potentially caused FLSA violations for all Smokey Bones servers and bartenders. The waitstaff and the other opt-ins’ declarations stated that at least three Smokey Bones locations in three different states all implemented the side work discussed in the server and bartender descriptions in such a way as to require violations of the dual-jobs regulation and/or the FOH’s twenty-percent rule.

Smokey Bones has 67 locations along the East in 16 states including Pennsylvania, New York, North Carolina, South Carolina, Florida, Massachusetts, Rhode Island, Maryland, Illinois, Kentucky, Indiana, Tennessee, Michigan, Georgia, Ohio, and Virginia.

Mastro’s Restaurant Accused of Stealing from Tip Pool

tip pool

Tipped employees at Mastro’s Steakhouse in Chicago sued the restaurant in Illinois state court, claiming that the restaurant illegally retained a portion of the tip pool, and failed to pay its servers the correct minimum wage.

Former Mastro’s busser Jose Murata brought the class action in Illinois State Court against Mastro’s, accusing the restaurant of violating Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act when it kept part of the pool of tips shared by its front of the house employees.

Attorneys for the severs claim that “the net effect of defendant’s policies and practices is that defendant willfully failed to pay the full amount of compensation earned and due to plaintiff and all other similarly situated employees,” and that “defendant thus enjoyed ill-gained profits at the expense of its hourly employees, including its Tip Credit Employees and Tip Pool Employees.” The class action lawsuit alleges that “in exchange for said labor, defendant was obligated to plaintiff and each member of putative … class the full amount of wages they earned, including tips. Defendant’s practice of operating an illegal tip pool and its improper taking of the Tip Credit has resulted in defendant’s Tip Credit Employees not being paid the full amount of minimum wages owed to them.” The lawsuit, claims that the restaurant was not allowed to take a  tip credit because it failed to pay the proper amount of wages to its servers.

Restaurants cannot require servers to share their tips with non-service employees who do not customarily and regularly receive tips, such as dishwashers, cooks, chefs, janitors, and managers. Restaurants can require waiters to split their tips from customers with other front of the house employees who provide personal service to customers as a principal and regular part of their duties (such as bussers, bartenders, barbacks, food runners, captains who provide direct food service to customers, and hosts who greet and seat guests).

Dimora Ristorante Pays Waiter $60,000 in a Wage Violations Settlement

Dimmora Ristorante pays a Waiter $60,000 in a Wage Violations Settlement

Dimora Ristorante, an Italian restaurant in Norwood, New Jersey, has paid $60,000 to a former waiter to settle a wage violations lawsuit for unpaid minimum and overtime wages and tip theft.  The waiter argued that Dimora unlawfully required all front-of-the-house tipped employees, such as waiters and bussers, to pool their tips and share portions of them with two of the restaurants’ managers.

Under the FLSA, a restaurant can require front-of-the-house employees to pool and share their tips.  However, the restaurant violates the FLSA if managers participate in the tip pool.  Only non-managerial tipped employees can participate in the tip pool.  If a restaurant violates this rule, it loses the tip credit, which is the privilege of paying front-of-the-house tipped employees at a reduced hourly wage rate.  If this happens, the restaurant must pay back the tipped employees the tip credit, i.e., the difference between the full minimum wage rate and whatever reduced amount it paid them (which cannot be lower than $2.13 in New Jersey).

This is what the waiter argued against Dimora.  According to the waiter, Dimora required him to share portions of his tips with two managers who hired, fired, interviewed, directed the duties, and set the work schedules of tipped employees.  Because of this violation of the FLSA, the waiter claimed that the restaurant should not have paid him at the reduced wage rate of $2.90 per hour.  He argued that because Dimora violated the FLSA, it should have paid him the full minimum wage rate of $8.38 in effect in 2016 in New Jersey.  In other words, the waiter claimed he was owed the tip credit of $5.48 (i.e., the difference between $8.38 and $2.90) per hour worked up to 40 per workweek.  The waiter also claimed that the restaurant failed to pay him any wages at all for hours worked over forty per workweek.

The waiter was represented by Louis Pechman and Gianfranco Cuadra of Pechman Law Group PLLC.

TGI Friday’s Settles Wage Theft Case for $19.1 Million

TGI Friday's Wage theft lawsuit

A nationwide wage theft lawsuit against TGI Friday’s has been settled for $19.1 million according to a court filing by the workers’ attorneys in New York federal court. The settlement, which covers 28,000 restaurant workers, is a record amount for resolution of a wage theft lawsuit in the restaurant industry. This settlement is the latest example of fast casual restaurants across the United States paying out millions of dollars on wage theft cases.

The lawsuit alleged that TGI Friday’s failed to pay its tipped hourly food service workers the proper minimum wage, overtime pay, and misappropriated tips. Attorneys for the servers, bussers, runners, bartenders, barbacks and hosts, claimed that TGI Friday’s failed to satisfy the strict requirements under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”) that would allow them to pay a reduced minimum wage rate to tipped employees. In particular, TGI Friday’s had a policy and practice that required tipped employees to spend over two hours and/or in excess of 20% of their work shift performing non-tip producing “side work.” Side work included, general cleaning of the restaurant, preparing food in bulk for customers, cutting produce, refilling condiments, and stocking and replenishing the bar and service areas. According to attorneys for the workers, this practice violated the “80/20 rule” and TGI Friday’s should have paid the tipped employees the full minimum wage rate, rather than reduced tipped minimum wage rate.

The front of the house workers also alleged that TGI Friday’s required them to perform “off the clock” work for which they were never compensated. “Off the clock” work consisted of requiring them to arrive at the restaurant one hour before customer service to perform side work, requiring them to punch in after they got their first table, and punch out before they performed closing side work. As a result of these practices, workers were not compensated for all the hours they worked and when they worked over forty hours per workweek, they were not paid overtime pay. Furthermore, the lawsuit claimed that TGI Friday’s required tips to be distributed to employees who are not entitled to tips under the FLSA and/or NYLL such as, silverware rollers and expeditors. Additionally, workers were given only one uniform, which TGI Friday’s failed to launder or pay workers the statutory uniform allowance. Finally, TGI Friday’s was accused of making unlawful deductions from employee wages for customer walkouts.

If approved, the settlement would resolve a nationwide class action brought by more than a dozen workers, alleging violations of the FLSA and claims brought under the labor or unfair competition laws of nine states: California, Colorado, Connecticut, Florida, Illinois, Maryland, Michigan, New Jersey and New York.

 

Ruby Tuesday Restaurant in Times Square Sued by Bartender for Wage Theft

Ruby Tuesday Lawsuit Tips Hours Bartender

Ruby Tuesday’s Times Square location was sued for wage theft by a former bartender, Amanda Zarfos, who alleges that the restaurant failed to pay tipped employees for all hours worked and violated the so called 80/20 rule.

The lawsuit, filed in New York federal court, claims that during her employment at Ruby Tuesdays, servers and bartenders at Ruby Tuesday were improperly paid at the tipped minimum wage  rate for all hours worked even though they spent more than 20 percent of her shifts performing work that involved no customer interaction and did not generate tips.  For example, Zarfos was required to brew beverages, cut lemons, bake bread, help pack to-go orders, and wipe wood.  According to the Department of Labor’s Field Operations Handbook,

The FLSA permits the employer to take a tip credit for time spent in duties related to the tipped occupation of an employee, even though such duties, are not by themselves directed toward producing tips, provided such related duties are incidental to the regular duties of the tipped employees and are generally assigned to the tipped employee. For example, duties related to the tipped occupation may include a server who does preparatory or closing activities, rolls silverware and fills salt and pepper shakers while the restaurant is open, cleans and sets tables, makes coffee, and occasionally washes dishes or glasses.  However, where the facts indicate that tipped employees spend a substantial amount of time (in excess of 20 percent of the hours worked in the tipped occupation in the workweek) performing such related duties, no tip credit may be taken for the time spent in those duties. All related duties count toward the 20 percent tolerance.

Similarly, the New York Labor law has an analogous prohibition covering non-tipped work exceeding 20 percent of a shift.

Attorneys for the restaurant workers also claim that tipped employees were required to work off-the-clock without pay. The lawsuit claims that employees were not allowed to clock in despite the restaurant knowing and expecting them to start working.  Willful refusal to pay employees wages for off-the-clock work is a violation of the Fair Labor Standards Act and the New York Labor Law.

Indian Restaurant Ordered to Pay $1.4 million to Five Restaurant Workers for Wage Violations

Indus Valley wage violations

Indus Valley Restaurant, an Indian restaurant on the Upper West Side, has been ordered by a New York Judge to pay $1.4 million in back pay and damages to five former restaurant workers for wage violations.

Indus Valley, now closed, was accused by the workers of failing to pay minimum wage, overtime, and spread of hours pay as required by the Fair Labor Standards Act and New York Labor Law. The workers who sued the restaurant included two cooks, a food runner, a waiter, and a busboy. The workers, who regularly worked up to seventy-two hours per week, were each paid a fixed weekly salary, rather than an hourly wage. They did not receive overtime payment when they worked over forty hours in a workweek.  Three of the employees are also owed unpaid minimum wages.

The decision follows an inquest at which the employees gave sworn testimony about their weekly schedules and payments from Indus Valley.  The owners failed to appear and were held in default by the Court.  Indus Valley is ordered to pay $1,412,318.66 plus interest, for unpaid wages, liquidated and statutory damages. Laura Rodriguez, an associate at Pechman Law Group, was lead attorney on this case.

Rosa Mexicano Reaches $3.6 Million Settlement with Servers for Tip Violations and Overtime

rosa mexicano overtime pay lawsuit tip theft

Rosa Mexicano has agreed to pay $3.6 million to settle a nationwide class action lawsuit alleging that the upscale Mexican restaurant chain failed to pay its waitstaff minimum and overtime wages and misappropriated tips.  The settlement agreement covers an estimated 3,500 employees at twelve locations in New York, New Jersey, Los Angeles, San Francisco, Miami, Boston, Atlanta, Washington D.C., Baltimore, and Minneapolis.

The restaurant workers filed the lawsuit suit in New York federal court in July of 2016, arguing Rosa Mexicano claimed an invalid tip credit and improperly paid their waitstaff at a tipped minimum wage instead of the full minimum wage. The waitstaff claims in their lawsuit that Rosa Mexicano did not inform them they would be paid at tipped minimum wage and misappropriated their tips, violating the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). Tips were shared with “floaters”, who conducted miscellaneous tasks around the restaurant without ever having customer contact. According to the lawsuit, these “floaters” were not entitled to sharing in a tip pool, invalidating Rosa Mexicano’s tip credit.  The wage theft lawsuit also claimed that Rosa Mexicano did not pay waitstaff for hours worked over forty per week. Some former servers claimed to work up to 50 hours per week without receiving overtime pay. The lawsuit also alleges that waitresses, waiters, bussers, and bartenders did not receive “call-in pay” required under NYLL, when they reported for work only to be sent home before being able to work three hours. One of the former workers claims this happened on 146 shifts.  For these violations, the employees sought to recover unpaid minimum wages, unpaid overtime wages, unpaid “call-in pay”, liquidated damages and attorneys’ fees.

The attorneys for the restaurant workers are Fitapelli & Schaffer, a New York law firm. The settlement is subject to approval by United States Magistrate Judge Ronald L. Ellis.

 

 

Department of Labor Rescinds Tip Pooling Rule

tip tip pooling tip theft

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.

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