The restaurant empire of Seattle chef Tom Douglas will pay $2.4 million to settle a class action lawsuit, consisting of more than 1,300 current and former employees across various restaurants. More than a dozen restaurants were accused of tip credit and tip misappropriation resulting from a non-disclosed service fee.
The lawsuit alleged that as a result of the minimum wage hike in Seattle, Tom Douglas began “a systematic scheme” of wage violations against its tipped employees, which included servers, food runners, bartenders, bussers and hosts. To compensate for the rise in the minimum wage, many restaurants began including automatic service charges on bills, which the restaurants retained. Tom Douglas restaurants including Dahlia Lounge, Palace Kitchen and Brave Horse Tavern failed to disclose to their customers how much of the new charge went to the servers or was kept by the restaurant. As a result, customers believed the new service charge was given to the tipped employees and those employees were unable to retain all their intended tips.
There are various requirements under the Fair Labor Standards Act (FLSA) and local labor laws that must be met in order for restaurants to be eligible to pay their employees a tipped minimum wage. In order for a restaurant to take a tip credit, it must provide notice of the following information to a tipped employee:
1. The amount of cash wage the employer is paying a tipped employee, which is as little as $2.13 per hour in some states but an amount ranging from $7.50 to $10.00 per hour in New York;
2. the additional amount claimed by the employer as a tip credit, which in New York depends on location and ranges from $3.60 to $5.00;
3. the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
4. all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
5. the tip credit will not apply to any tipped employee unless the employee has been informed of all of the above tip credit provisions.
If you are a tipped worker who has questions about their wage theft or tip theft, please call the attorneys at Pechman Law Group at 212-583-9500. We have handled over two hundred restaurant pay cases across the United States.