Credit Card Tips

Department of Labor Rescinds Tip Pooling Rule

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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.

“Best Restaurant in America” To Pay $2 million to Settle Tip Theft Lawsuit

Blue HIll tip theft lawsuit

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.

 

Happy National Waiters and Waitresses Day!

old school waiter photo

Today is National Waiters and Waitresses Day. To commemorate, check out this blog about the top ten wage violations in the restaurant industry written by waiterpay.com founder Louis Pechman, featured on the Huffington Post.

Chickie’s & Pete’s Tip Lawsuits Settle for $8.5 Million

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Chickie’s & Pete’s, widely recognized as the best sports bar in America, has reached a proposed settlement regarding the company’s pay practices for its tipped employees. The restaurants will pay approximately $6.6 million to more than 1,100 employees who worked at 12 different locations throughout the region over the last three years, in accordance with a settlement with the Department of Labor. At the same time, the restaurants reached a $1.68 million settlement with approximately 90 current and former employees who filed federal lawsuits that included many of the same allegations raised in the Department of Labor matter. The settlement is an excellent outcome for Chickie’s & Pete’s employees and for the company, and this recovery represents Pete Ciarrocchi’s good faith efforts to make his workers whole. Louis Pechman, founder of waiterpay.com, was the lead attorney for the waiters, waitresses, and bartenders in the federal lawsuit.

Chickie’s & Pete’s is by no means the first restaurant company to face scrutiny of its tipped employee pay practices. Many restaurant operators across the country have faced similar issues relating to tip pools and tip credits. In fact, hundreds of restaurant operators across the country – ranging from mom-and-pop operations to industry giants like Mario Batali (who in 2012 reached a $5.25 million settlement), Bobby Flay, Outback Steakhouse, and Darden Restaurants (owners of Olive Garden, LongHorn Steakhouse and Red Lobster) – have been subjected to allegations challenging their compliance with federal and state law rules regarding “tip pools” and “tip credits.”

Tips For Jesus

Customers affiliated with the handle @TipsForJesus are leaving bartenders and servers thousands of dollars in tips.  The generous tips are detailed on the  TipsForJesus Instagram account.  The Instagram account has the motto “ Doing the Lord’s work, one tip at a time.”  According to Gawker, TipsForJesus customers have left $54,000 to waiters, waitresses, and bartenders across the country.

Restaurant Worker Rights Group Is Accused of Misconduct

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Restaurant Opportunities Center (ROC), a restaurant worker rights advocacy group has been accused of misconduct.  In an opinion piece published in the New York Post, Mike Paranzing accused the ROC of being a labor union front that doesn’t practice what it preaches.  Acccording to Paranzing, ROC exploited its own workers and cheated its employees at the restaurant Colors, and is guilty of the same labor abuses and health violations that it has leveled against other restaurants.

The FLSA at 75

The Fair Labor Standards Act (“FLSA”), which was signed into law by Franklin Delano Roosevelt on June 25, 1938 outlawed “oppressive child labor,” imposed a federal minimum wage of 25 cents per hour, and required overtime for hours worked over 40 in a week. But the America we live in is far different from that which existed 75 years ago and both employee advocates and company executives have raised serious questions as to how well the FLSA is currently working.  Read the full article written Louis Pechman, founder of waiterpay.com, on The Huffington Post.

This National Waiters and Waitresses Day Know Your Rights!

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Today is National Waiters and Waitresses Day. Check out our blog featured in the Huffington Post!

Blue Ribbon Restaurant Sued for Tip Theft

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Servers at Blue Ribbon Restaurant in Brooklyn, New York have sued the restaurant for unlawfully skimming tips.  The lawsuit, filed in Brooklyn federal court, claims violations of restaurant worker rights under the Fair Labor Standards Act (FLSA) and the New York Labor Law (NYLL).

According to the Complaint, at Blue Ribbon Brooklyn all food service employees participated in a mandatory tip pool.  Restaurant patrons’ tips, whether given in cash or by credit card or other cash equivalent, were not paid directly to waitstaff, but rather collected as they were given, deposited in the central till and purportedly distributed daily and nightly to food service workers.

Attorneys for the workers claim that the central till system permitted defendants to make deductions from tips to cover defendants’ cash shortages or losses.  For example, a person formerly employed at Blue Ribbon Brooklyn as a waiter perpetrated a scheme to steal money from the restaurant.  According to the Complaint he accomplished this theft by exceeding his authorized access to the restaurant’s computer system, recording certain unpaid restaurant checks as paid and pocketing the cash that customers had placed on their tables to pay for their meals.

The lawyers for the servers, waiters, and busboys claim that at the end of each shift, a restaurant employee would total the food and beverages billed to customers.  That amount would be removed from the till and deposited in the defendants’ bank account and/or remitted to credit card issuers.  The amount remaining in the till after removal of restaurant receipts would be distributed to participants in the tip pool.  The money remaining in the till for distribution to the tip pool was, however, less than the full amount tipped by customers, because a portion of the amounts tipped by customers equal to the monies stolen by the thief had been removed and deposited in the defendants’ bank account and/or remitted to credit card issuers.  The Complaint alleges that this way, the restaurant made deductions from the tip pool to cover their own losses or cash shortages.

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