Service Charge

“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.


Class Action Status Granted in Lawsuit Against Mallozzi’s Restaurants

mallozzi restaurant logo

The Albany Times-Union reported on the class action certification of a lawsuit filed by servers who worked at Mallozzi’s Restaurants in the Albany, New York area. The lawsuit alleges that Mallozzi’s charged banquet customers a mandatory “20% service personnel charge,” but while banquet customers reasonably believed this charge to be gratuity, Mallozzi’s retained the funds and did not distribute them to servers, who were paid at a flat hourly rate. In the Decision by Judge Richard Platkin, the Court found that class action status was warranted to address the claims that the restaurant’s retention of the service charge violated the New York Labor Law.

The attorneys for the restaurant workers are Louis Pechman, founder of, along with Maimon Kirschenbaum. Over one hundred employees, who worked at Mallozzi’s since July of 2008, are covered by the class action.

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 founder Louis Pechman, featured on the Huffington Post.

Four Seasons Hotel in Hawaii Pays $4 Million to Settle Tip Lawsuit

four seasons hotels and resorts logo

A tip theft lawsuit filed by food and beverage workers at the Hawaii Four Seasons hotel has been settled for $4 million.  The lawsuit which challenged the hotel’s automatic deduction of gratuities left by patrons was approved by Judge Helen Gilmor after five years of litigation.

The Four Seasons hotel food and beverage service workers sued Four Seasons in 2008, alleging that the hotel kept portions of gratuity fees it automatically added to guests’ checks such as those added on bills for large parties.  In 2010, Judge Gillmor ruled that Four Seasons unlawfully retained service charges that should have been given to waiters, busboys, and other service staff.

This case highlights the unlawful practice of employers pocketing tips and gratuities meant for servers.  In New York, Section 196-d of the New York State Labor Law prohibits employers from demanding, accepting, or retaining, directly or indirectly, any part of an employee’s gratuity or any charge purported to be a gratuity. A charge purported to be a gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.  For more information on the law, see the Hospitality Wage Order.

Waiterpay Founder Featured on Brooklyn TV

Louis Pechman, the founder of Waiterpay, was a featured guest on BK Live’s June 2, 2014 segment on Tipped Wages.  The segment focused on pay issues in New York City restaurants, including concerns about the increase in lawsuits for illegal pay practices.  Among the topics discussed were the differences between minimum wage and tipped minimum wage, the complicated set of laws involving the tip credit, spread of hours, and other worker rights issues.

Food Network Celebrity Willie Degel Agrees to Pay $900,000 to Settle Wage and Hour Lawsuit

uncle jacks steakhouse logo

Uncle Jack’s Steakhouse and its owner, Food Network Celebrity Willie Degel, will pay $900,000 to settle a wage theft lawsuit filed against its restaurants located in Bayside, Queens and Midtown, New York City.  Ironically, Degel was featured on Food Network’s Restaurant Stakeout, a show which followed Degel as he visited restaurants across the country with hidden cameras to capture their food service problems and attempted to fix them.

On May 22, 2014, Judge Loretta Preska, Chief United States District Court Judge in the Southern District of New York, approved a $900,000 settlement between the restaurants and its workers, who alleged that their worker rights were violated by the restaurant.  Approximately 239 restaurant workers who worked between September 2002 and September 2008 at the New York City and Queens restaurants are expected to benefit from the settlement.

The lawsuit, which was filed in 2008 by captains, waiters, runners, bussers, and bartenders, alleged that the restaurants failed to pay them at the legally required minimum wage, routinely shaved their hours when they worked over 40 hours and refused to pay them overtime wages for hours worked over 40, misappropriated gratuities belonging to the waitstaff, failed to pay spread of hours pay when the employees’ workdays exceeded ten hours, and refused to pay for employee uniforms or laundering of such uniforms.

Fresh Direct Delivery Workers Sue for Unpaid Wages, Overtime, and Gratuities

fresh direct logo

Delivery workers for Fresh Direct, an online food and grocery retailer, have sued for unpaid wages and violations of the overtime provisions of the Fair Labor Standards Act (“FLSA”) and New York Labor Law.  According to the Complaint filed in Manhattan federal court by the delivery workers, Fresh Direct misled its customers in believing that the delivery charge it imposes on customers is a gratuity.  Attorneys for the delivery workers claim that the company’s acceptance and retention of gratuities belonging to the delivery workers violate the New York Labor Law.

Oheka Castle Hit with Wage Theft Lawsuit

oheka castle exterior

Oheka Castle, a catering facility for weddings and lavish events in Huntington, Long Island, has been hit with a wage theft class action by a former server and bartender.

According to the federal court Complaint filed by the attorneys for the workers, the catering facility (which was once the second largest residence in the United States) developed a fraudulent timekeeping scheme in order to avoid the payment of overtime premiums to their waitstaff.  When workers worked more than forty hours in a single workweek, they were required to carry over their hours to subsequent weeks, so that company records would not reflect that they worked more than forty hours in a given workweek.  In addition, the catering facility regularly required workers whose hours approached forty hours in a workweek to clock out of the company’s biometric timekeeping system and continue working.

Attorneys for the workers allege that the catering hall misappropriated tips belonging to servers and bartenders.  The Complaint alleges that owner Gary Melius personally confiscated cash tips left by patrons for other service staff.  Moreover, Oheka charges patrons of their restaurant and catering services, a “service charge” of up to 22% which is added to the bill, leading patrons to believe that the service charges would be paid to the service staff.  According to the lawsuit, however, Oheka violated the New York Labor Law because it did not remit any of those service charges to the service staff.

Service Charge Case Against Madison Square Garden Moves Forward

madison square garden logo

The claim of workers at Madison Square Garden that service charges imposed by the Garden were “gratuities” that were not passed on to the workers has been given the green light by an appellate court in New York.  The servers all worked during the last decade as food and beverage servers at Madison Square Garden.

Attorneys for the workers brought the class action wage lawsuit, based on New York Labor Law §196-d, claiming that the Garden retained a portion of a mandatory “service charge” that should have been allocated to them as a gratuity. The Garden argued that the labor law lawsuit should be dismissed the gratuities claims are preempted by federal law and, alternatively, that the claims are subject to mandatory grievance and arbitration under a collective bargaining agreement. Both arguments made by MSG were rejected by the Court and the case has been allowed to continue.

The servers at MSG claim that at sports and entertainment events, MSG charges and collects “service charges” in the amount of 20 percent of the total charge assessed for all food and beverages. This charge is added to the bill because, unlike ordering restaurant services during which customers tip servers individually, the servers in the Garden are presumably not permitted to collect tips from customers attending Garden events. The workers claim that MSG led its customers and patrons to believe that the service charges were entirely gratuities for the service staff who served the food and drinks at these events.

The complaint alleges that MSG did not distribute to the service staff all the service charges it collected. The Court found that the servers stated a valid claim under New York Labor Law §196-d. Section 196-d states, in relevant part, that “[n]o employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.” Judge Renwick, writing for a unanimous panel of the Appellate Division, First Department, noted that the “plain language of section 196-d prohibits any retention or withholding of gratuities by the employer” and that “under New York’s Labor Law, an employer cannot withhold from its employees any portion of a mandatory service charge that is added to a customer’s bill unless the employer makes it clear to the customer that it is retaining some or all of the charge.”

Class Action Certification Granted In Wage Theft Case Against Megu Restaurant

megu restaurant logo

A class action lawsuit against Megu Restaurant alleging minimum wage, overtime, and service charge violations has been certified as a class action by a New York federal court.

In a Decision by District Court Judge Analisa Torres, conditional collective and class certification was granted to servers at the restaurant who claimed that non-service employees were unlawfully included in the tip pool.

The disputed issue in the Megu case is the tip eligibility of sushi chefs, stockers, and expediters.

Judge Torres explained in her Decision that Section 3(m) of the FLSA allows an employer to pay “tipped employees” an hourly rate less than the federal minimum wage by crediting a portion of the actual amount of tips received by the employee against the required hourly minimum wage.  An employer may not avail itself of the tip credit if it requires employees to share their tips with employees who do not regularly and customarily receive tips.  Therefore, an employer loses its entitlement to the tip credit if it requires tipped employees to share tips with (1) employees who do not provide direct customer service or (2) managers.  According to Judge Torres when deciding whether an employee customarily and regularly receives tips, courts must determine whether the employee’s job is historically a tipped occupation and whether he has more than “de minimis” interaction with customers as a part of his employment.

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