Tip Credit

Owners of Charleston Area Restaurants to Pay Nearly $1.2M in Back Wages and Damages


An investigation by the U.S. Department of Labor’s Wage and Hour Division found that the owners of 13 Charleston, South Carolina area restaurants violated minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (FLSA).

Under the FLSA, employers are allowed to take a “tip credit” and pay tipped employees below the full federal minimum wage per hour if the employees will make at least minimum wage after keeping their tips.  To legally apply the tip credit, a restaurant must ensure that all tips received by tipped employees are retained by the employees (unless there is a valid tip pooling arrangement). In the present case, the employer required servers to give a percentage of their tips back to them and compelled three servers to work for only tips. The restaurant owners also required workers at some locations to purchase their uniforms, which reduced their earnings below the minimum wage.

The investigation also found that the employer failed to pay cooks, dishwashers and runners for all hours worked, resulting in these employees not earning minimum wage for all hours worked. Furthermore, these workers did not receive overtime pay of time-and-one-half for all hours worked beyond 40 in a workweek. Lastly, the owners failed to keep legally mandated time and attendance records.

Judge C. Weston Houck, of the U.S. District Court for the District of South Carolina, approved a consent judgment between the department and the owners, who will pay a total of $1,179,045 to 119 employees, which includes $589,523 in back wages and an additional equal amount in liquidated damages for all affected employees who worked at any of the 13 restaurants from Aug. 13, 2011 to Dec. 13, 2014.




Iowa Restaurants Sued for Tip Credit Wage Violations

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Servers at two Des Moines, Iowa restaurants, Johnny’s Italian Steakhouse and Centro Restaurant, have filed lawsuits against the restaurants alleging violations of the Fair Labor Standards Act (FLSA) and Iowa wage laws. In the collective action and class action lawsuits, filed in Iowa Federal Court, the servers assert that they were illegally paid a tipped minimum wage rate for time spent performing non-tipped work, such as sorting, polishing, and rolling silverware and cleaning tables, counters, walls, and floors.

Under the FLSA and Iowa wage laws, employers are allowed to take a “tip credit” and pay tipped employees such as waiters and bussers below the federal minimum wage of $7.25 per hour. However, employees who spend more than 20% of their time doing non-tipped work must receive the full minimum wage rate for time spent performing those duties. The lawsuits allege that the servers were paid at the Iowa reduced minimum rate of $4.35 for all hours worked even though they spent more than 20% of their working time performing non-tipped duties such as setting-up and cleaning.

This so-called 80/20 rule has been the subject of a previous waiterpay blog regarding Applebee’s.



Serendipity 3 Restaurant Sued for Wage Violations


Serendipity 3 Restaurant, renowned for its $25,000 ice cream sundae and feature in the movie Serendipity, has been sued for minimum wage, overtime, and tip credit violations by a former server. The lawsuit, filed by WaiterPay.com founder Louis Pechman, has been reported on by the New York Daily News, the New York Post, Daily Mail, and Law360.

Servers Say NO To No-Tipping Policy

No-Tipping Policies at Restaurants

Restaurants that have adopted a “no tipping” policy and got rid of tips in favor of a higher hourly wage have received a great deal of media attention in the last few months. While much has been discussed from the management and customer perspective, WaiterPay.com conducted a survey to get the server point of view. We sampled a group of about 200 restaurant workers, the majority from the tri state area, and asked how they thought a no tipping policy would affect their work performance and livelihood.


According to the survey, 78% of participants believed there was a direct correlation between tips and service, agreeing that “the quality of service greatly affects tips.”


When asked “How will a no-tipping policy affect the quality of service you provide to customers?”

38% of survey takers said they believe the no tipping policy will significantly reduce the quality of service they provide to customers.

30% of survey takers said they believe the no tipping policy will not affect the quality of service they provide to customers.

32% of survey takers said they believe the no tipping policy would slightly reduce the quality of service they provide to customers.


When asked, “Do you believe earning a higher hourly wage and eliminating tips will reduce your incentive to upsell?”

 33% will not have a reduced incentive to upsell.

77% will have a reduced incentive to upsell.


When asked, “How do you think eliminating tipping and earning a straight hourly wage will affect the amount you earn?”

94% believed they would be earning less.

3% thought they would earn more.

3% thought they would earn the same.


When asked, “Do you think front of the house workers should make a higher hourly wage than back of the house workers?”

35% said back of the house workers should be making more than front of the house workers.

46% thought they should be making the same.

19% said front of the house workers should be making more than the back of the house workers.


When asked, “If tips were eliminated at your restaurant, what do you think is a reasonable hourly wage for serves?”

The survey average was $25/hr.


When asked, “Do you believe that restaurants should adopt a no tipping policy?”

94% of survey takers  said NO.
2% of survey takers said YES.


For more information about the survey please check out Waiterpay.com’s Facebook and feel free to contact Louis Pechman at [email protected]

New York Red Robin Restaurants Hit with Wage Theft Class Action

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Red Robin, fresh off of a $1.3 million settlement for its servers in Pennsylvania, had been hit with a class action lawsuit on behalf of servers at Red Robin restaurant in New York.

The New York class action lawsuit alleges that Red Robin required its waiters, waitresses, and bussers, to share their tips with expediters even though the expediters had little to no direct interaction with customers. The lawsuit also claims that Red Robin required its servers to perform substantial side work, which exceeds 20 percent of their work time. That non-tip producing side work included cleaning, preparing food, refilling condiments, and stocking and replenishing the bar and food stations. Under the New York Labor Law, on any day that a server works at a non-tipped job for two hours or more for more than twenty (20) percent of the workday (which ever is less), the wages of the server are not subject to a tip credit for that day.

Jury Trial Win for Two Waitresses in Brooklyn Federal Court


After a four-day trial, a jury ruled that Las Margaritas, a restaurant in Astoria, is liable to two former waitresses for violations of the Fair Labor Standards Act and the New York Labor Law. The waitresses were represented by Vivianna Morales and Lou Pechman, founder of waiterpay.com.

The six-person jury found that Las Margaritas willfully failed to pay the waitresses the minimum wage, and determined that the restaurant was not permitted to apply a tip credit towards their wages, as the restaurant failed to abide by the strict tip credit notice requirements. After hearing detailed testimony regarding the hours worked by the waitresses, the jury ruled that the waitresses worked more than forty hours a week but did not receive overtime pay for those hours and worked more than ten hours a day and did not receive spread of hours pay.

The jury determined that Las Margaritas also violated New York’s Wage Theft Prevention Act because it failed to provide the annual written wage notice and paid the waitresses their wages without a paystub. Las Margaritas also violated New York Labor Law by failing to pay the waitresses a uniform allowance of $9.00 per week as well as making deductions  from the waitresses’ pay or making them pay out of pocket if the cash register was short.

The case was tried before Magistrate Judge Cheryl Pollak, who issued an important decision that addresses tip credit requirements under the New York Labor Law.




Grimaldi’s Pizzeria Sued for Overtime and Wage Violations


Brooklyn pizzeria, Grimaldi’s has been served with a wage theft lawsuit by one of the cooks who made its famous thin crust pies. The pizzeria, perennially named on lists having the best pizza in New York and the best pizza in America, has been accused of violating the minimum wage and overtime requirements of the New York Labor Law and the Fair Labor Standards Act.

According to the lawsuit, the Brooklyn pizzeria paid Nery Sosa, a kitchen worker, a weekly salary of $600 even though he worked as many as eighty-four hours per week. As Sosa was on a salary, Grimaldi’s failed to pay him overtime at one and a half times his regular rate of pay for hours he worked in excess of forty per work week. Grimaldi’s also did not pay Sosa spread of hours pay, when Sosa’s daily shift spanned for more than ten hours.

The lawsuit seeks to recover unpaid wages, overtime compensation, spread-of-hours pay, liquidated damagesand attorneys’ fees.


New Year = Higher Pay for New York Restaurant Workers

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Effective December 31, 2015, the minimum wage in New York increases to $9 per hour. The tipped minimum wage increases to $7.50 per hour for front of the house restaurant workers, including waiters, waitresses, bussers, runners, valets, and coat checkers. The overtime rate for front of the house restaurant workers increases to $12 per hour. The rate for spread of hours pay increases to $9.00.

Uniform maintenance pay increases to $11.20 per week for work weeks of more than 30 hours; $8.85 for work weeks of more that 20 hours, but less than 30 hours; and $5.35 per week for work weeks of 20 hours or less.

If a restaurant qualifies as a fast food establishment under the New York Fast Food Wage Order, the minimum wage increases to $10.50 per hour in NYC and to $9.75 per hour in the rest of New York State. For more information on these minimum increases please click here.

Texas de Brazil Sued for Tip Credit Violations


The Yonkers and Manhattan locations of Texas de Brazil have been sued by its waiters for including non-service employees in the tip pool at the restaurants.

The class action lawsuit filed in New York federal court by attorneys for the workers, alleges that the Brazilian Steakhouse should not be entitled to take a tip credit because it permitted non-tipped, ineligible employees to share in the tip-pool. According to the waiters’ lawsuit, front of the house employees were required to share their tips with polishers, who polished dishes and did not serve, and were not visible to the patrons of the restaurant.

Lawyers for the restaurant workers seek backpay, return of tips, attorneys’ fees, and other damages on account of Texas de Brazil’s violations of the restaurant workers’ rights.

Danny Meyers’ Gramercy Tavern Accused Of Tip Theft Violations

gramercy tavern pictures

Two former busboys have sued Gramercy Tavern in a class action lawsuit alleging tip theft and tip credit violations. The case was filed in Manhattan federal court alleging New York Labor Law (NYLL) and Fair Labor Standards Act (FLSA) violations. Gramercy Tavern is owned by Danny Meyer, the restaurateur who recently announced that he plans to do away with customer gratuities at all his restaurants.

The employees claim that the restaurant unlawfully required the waitstaff to share tips with non-tipped employees, including expeditors, polishers, and wine managers. According to the Complaint neither expeditors nor polishers performed any direct customer service. Wine managers interacted with customers but also had managerial duties, making them ineligible for the tip pool. The lawsuit states that due to these alleged violations, the restaurant was ineligible to claim a tip credit and was lawfully required to pay its waitstaff the statutory minimum wage ($8.75 in New York), rather than the tipped minimum wage of $5.00 per hour. According to the lawsuit, Gramercy Tavern also made customers who booked private events pay a service charge of 20%. The service charge was allegedly retained by the restaurant, which is illegal because the customers thought the money was a gratuity for the employees.

Attorneys for the workers are seeking unpaid wages, compensation for unlawful deductions, tip disgorgement, liquidated damages, and attorneys’ fees.

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