Articles Posted in Tips

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While most restaurants leave it up to their customers to decide how much to tip their servers, some restaurants include a mandatory gratuity or “service fee” in their bills. Sometimes this is done only for large groups of diners. Other times it is included as an extra charge when customers choose the private dining option.

Mandatory gratuity is legal only if the money is used for the sole purpose of paying the server. Unfortunately, restaurants sometimes include mandatory gratuities and service charges on their bills without passing on any of that money to the servers. Instead, the money goes to pay for other aspects of running the business, or the owners take it as profit. Either way, the practice is unfair to both servers and customers. Continue reading

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Employers that refuse to pay their employees the proper rates for all time worked could find themselves facing a lawsuit. They can either try to settle the lawsuit outside of court, or risk having to pay the employees an amount determined by a jury. If they decide to take their chances with the jury, employers might also have to pay federal fines to the government as punishment for violating the federal Fair Labor Standards Act (FLSA).

The FLSA sets a federal minimum wage of $7.25 per hour. All employees working within the United States must be paid no less than $7.25 per hour, except for tipped employees. Under the FLSA, tipped employees can be paid the lower minimum wage of $2.13 per hour, but only if these wages, combined with the tips they make, add up to at least $7.25 per hour. Continue reading

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Although the federal Fair Labor Standards Act (FLSA) requires employers to pay their workers a minimum hourly wage, employees who earn tips can legally be paid a much lower minimum wage. This is because the law assumes the employees are making up the extra wages in tips, but when that’s not the case, the employer is required to make up the difference.

According to a recent wage and hour class action lawsuit, Logan’s Roadhouse Inc. allegedly underpaid its servers by requiring them to work off the clock, perform too much side work, declare tips they did not receive, and transferred tips to subsequent weeks to satisfy tip requirements.

Side work is often included as part of a server’s job responsibilities. It consists of work for which the servers do not receive tips, including opening and closing duties, cleaning, stocking supplies, etc. Under the relevant labor law, tipped employees can spend no more than 20% of their time performing side work. Any more than that, and they are entitled to be paid the full minimum wage.

Declaring the amount a server earned in tips is also standard practice to provide proof that the server was paid at least the full minimum wage through the combination of wages and tips. However, declaring tips that a server was never actually paid is illegal. Continue reading

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You may have heard of the recent movement in Washington lobbying for a higher minimum wage, but did you know that there’s a similar movement to raise the tipped minimum wage? According to the federal Fair Labor Standards Act (FLSA), all employees working in the United States are entitled to be paid at least the federal minimum wage of $7.25 per hour.

The minimum wage for tipped employees, though, such as waiters and bartenders, is lower, only $2.13 per hour, with the expectation that the tips earned by the employees, combined with wages, will add up to at least $7.25 per hour. If that does not happen, the employer is required to make up the difference. As millions of Americans have already experienced, though, living on only $7.25 per hour can be extremely difficult, if not impossible, and that remains as true for wait staff as for employees of other professions.

The practice of tipping has some up sides to it, but they mostly favor the restaurant and the customers, not the wait staff. Because the restaurant keeps its labor costs down by paying its waiters less than the normal minimum wage, it is then able to keep menu prices down. Customers also don’t have to worry about paying sales tax on the gratuities they pay, unlike the rest of the meal, and tips do have the potential to significantly boost the income of servers, but it rarely works out that way.

Because tips are left entirely to the discretion of the customers, they can tip well, poorly, or not at all. In theory, the gratuity paid is based on the quality of service provided by the waiter, but the reality is that there are many other factors outside of the waiter’s control that contribute to how well he is tipped, including appearance, age, and gender. Other factors, such as weather, can affect the number of customers a waiter has on any given day, which, in turn, has an effect on how much the waiter earns in tips that day. Continue reading

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While there are federal laws, such as the Fair Labor Standards Act (FLSA) to make sure that employers to not abuse their workers, state laws also exist and the requirements placed on employers may differ from state to state. For example, most states allow companies to include a service charge on their bills, but these states may differ in their requirements for providing these extra charges. Unlike a gratuity, a service charge does not get paid to the wait staff of a facility. Instead, the extra charge goes to pay for things like set up and ambience. Many customers are unaware of the difference, though, and will fail to leave a tip when they see a service charge, thinking that the charge is an automatic gratuity. In order to prevent this, New York state law requires establishments to specify that a service charge will not be paid to the servers.

Hawaii also has state labor laws which govern the use of service charges. In that state, companies are allowed to include a service charge on their bills only if the charge gets paid directly to employees or if the company explicitly states that the money is not going to employees. Two employees working at a Ritz-Carlton Hotel in Hawaii allege that the hotel chain included a service charge without complying with either of these two requirements. As a result, employees working as waiters, servers, or cooks, often went without tips.

Because employees working in service positions, such as waiters and bartenders, generally receive tips, the FLSA allows employers to pay these workers a lower minimum wage. However, the law assumes that the employees’ tips and wages reach at least the federal minimum wage of $7.25 per hour. If this is not the case, then the employer is required to make up the difference. If employers are still withholding service charges when the employees are making less than minimum wage, then the employees have a right to try to collect their missing wages.

The lawsuit was filed by two food and beverage service workers on behalf of all similarly situated employees working for the hotel chain. The lawsuit sought several different types of damages, including recovery of the money charged from the service charges. It also asked for a cy-pres award, meaning that, if not all of the eligible employees come forward to claim their share of the settlement, then their share may go to a charity or some other cause which may indirectly benefit class members.

The Ritz-Carlton Hotel Company agreed to settle the wage and hour class action lawsuit for $1.8 million.

Courts have been seeing an increase in wage and hour class action lawsuits regarding service charges lately. It is generally believed by employment attorneys that the Great Recession had an effect on both an increase in violations of labor law and employees’ silence on the matter. Now that the job market has begun to stabilize, employees have begun speaking out and demanding that they be treated fairly and paid fair wages.

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When many people see a service charge included on their bill, they assume that it is part of a gratuity which goes to pay the wait staff. However, this is not usually the case. A gratuity, or a tip, is optional and is left entirely to the customer’s discretion. A tip gets paid directly to the server. A service charge, on the other hand, is a mandatory charge which is included in the final bill. Sometimes, these charges get distributed among the wait staff, but other times they go to management and are used to pay for things like event setup. However, when customers see a service charge on their bill, and think that it is a gratuity, they often fail to leave a tip.

In order to prevent this confusion, several states have developed laws which state that a company cannot include a service charge on their bill that does not get paid to the staff. If the company does include a service charge that is not used to pay the wait staff, the company must provide an explanation that the service charge is not a tip.

New York is one such state that makes this a legal requirement in order to protect employees working in service positions, such as waiters and bartenders. According to a recent class action wage and hour lawsuit, Yankee Stadium included a mandatory service charge in its contract for events which were privately hosted at the stadium. Three banquet servers who worked as waiters during these events have filed the lawsuit on behalf of themselves and all other similarly situated employees who worked for Yankee Stadium any time between 2009 and 2011.

According to the wage and hour lawsuit, the bills that Yankee Stadium provided allegedly did not contain any explanation of what the service charge was. In 2011, the contract was amended to say that only part of the service charge would be paid to the wait staff. However, that still leaves employees who worked as servers for the company for two years who have lost out on tips and wages which should have been paid to them.
The federal Fair Labor Standards Act (FLSA) and most state laws allow companies to pay employees working in service positions a lower minimum wage than the standard $7.25 per hour. This is because the law assumes that the employees are making at least minimum wage between their wages and the tips they earn from customers. If an employee earns less than minimum wage, the employer is required to make up the difference. According to the recently filed class action wage and hour lawsuit against Yankee Stadium, the practice of including a service charge without an explanation for that charge, allegedly resulted in employees working as waiters and banquet servers receiving less than minimum wage for the time that they worked.

Since a recent wage and hour lawsuit brought this law to the public’s attentions, employers have been faced with a flood of similar lawsuits by employees, all claiming that they were denied tips or wages as a result of their employer’s unfair service charge policy.

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While the distinction between a tip and a service charge may not seem like much, it can mean the difference between employees getting paid in accordance with the law or getting paid less than the federal minimum wage. Although employers are allowed to pay their tipped employees less than the federal minimum wage of $7.25 per hour, this holds true only so long as the employees’ tips and wages amount to at least the minimum wage. If the employees’ tips and wages together are not sufficient to reach the minimum wage, the employer is required to make up the difference.

A service charge is not a tip that gets paid directly to the wait staff. Instead the company collects the service charge to pay for things like music and set up. However, this distinction is not always made clear on the bill. Not every one is aware that a service charge is different from a tip. As a result, when a customer sees a service charge on a bill, she usually assumes that the charge is an automatic gratuity, to be paid to the wait staff, and does not provide an additional tip for the server. This loss of tips is unfair to the wait staff and usually results in the employees getting paid less than the minimum wage.

According to a recent wage and hour lawsuit, Chickie’s and Pete’s Inc., a chain of sports bars on the East Coast, allegedly included a service charge on its bills which allegedly was not clearly labeled to make customers understand that it was not a gratuity. As a result, the company allegedly collected about 60% of tips given to the wait staff and the staff received less than minimum wage for the time that they worked. The U.S. Department of Labor inspected the company’s collection and payment policies and filed the wage and hour lawsuit.

Rather than continue the lawsuit in court, the company decided to settle for $8.4 million. The company has also agreed to more intensely monitor its wage and hour practices in order to “ensure continuing compliance with the law.” The Department of Labor will also be scrutinizing the company’s employment practices more closely.

Wage and hour lawsuits concerning mandatory service charges have been on the rise lately. Although companies may not necessarily have the intention of depriving wait staff of their tips, failure to properly inform customers of the purpose of a service charge has the unfortunate tendency to do just that. As an attempt to remedy the situation, some courts have already prohibited companies from including a service charge on their bills unless the company informs the customers that the service charge is not a gratuity and will not go to the wait staff.

With the job market suffering from the latest Great Recession, many employees were afraid to do anything about the wages that their employers were denying them. Now that the economy has begun to stabilize, employees are fighting back against unfair employment practices. Hopefully, this wave of lawsuits concerning tipped employees will help to educate both consumers and employers on the importance of distinguishing between a gratuity and a service charge and the different requirements for each.

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The federal Fair Labor Standards Act (FLSA) allows employers to pay certain employees who receive tips a lower minimum wage. Unfortunately, this sometimes leads to employers trying to cut costs by paying workers who do not normally receive tips at the lower minimum wage. While some companies try to cut costs by including employees who do not normally receive tips in tip pools, one restaurant was allegedly cutting costs by having tipped employees allegedly perform work for which they did not receive tips. The employees’ paychecks though, still allegedly contained deductions to account for tips, resulting in alleged violations of both New York state labor law and the federal Fair Labor Standards Act.

The lawsuit was filed by Graciela Roman against the celebrity chef who owned the restaurants, Daniel Boulud, and the dining company, the Dinex Group LLC. Roman bused tables at restaurants owned by Boulud from December 2007 to July 2012. During those years, Roman alleges that she and other employees were required to spend as much as twenty percent of their time performing “side work” for which they did not receive tips. These alleged duties included preparing bread stations, taking out the garbage, sweeping the floors, and setting up dining tables. Despite spending so much of her time performing work for which she did not receive tips, Roman alleges that the restaurant always paid her at the lower minimum wage intended for employees who receive tips.
Although the federal Fair Labor Standards Act does allow employers to pay their workers a lower minimum wage if those employees receive tips, the law requires that the employee’s wages and tips combined must equal at least the federal minimum wage of $7.25 per hour. If the employee does not receive enough tips to reach the standard minimum wage, the employer is required to provide the employee with sufficient wages to make up the rest.

According to the lawsuit, “The Boulud restaurants have a corporate policy or practice of minimizing labor costs by unlawfully taking a tip credit against the minimum wage rate”. It is an unfortunate fact that, in efforts to cut costs by businesses, employees are often the ones who suffer the consequences. There are laws in place, though, to prevent employers from taking advantage of their employees. Employees who are unaware of their rights as workers, are advised to consult with a knowledgeable employment attorney.

The wage and hour class action lawsuit was filed against the chef in 2012. In 2013 Boulud tried to end the proceedings by denying Roman’s allegations. Judge Hellerstein denied Boulud’s motion, saying that the case was too fact-intensive and could not be rushed.

Rather than continuing with the litigation, Boulud has chosen to settle the lawsuit, despite continuing to insist that he has done nothing wrong and that no laws were broken in any of his restaurants. The settlement covers about ninety employees who worked as servers in several of Boulud’s restaurants in New York and were paid the lower minimum wage of employees who allegedly should be receiving tips.

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While the federal Fair Labor Standards Act (FLSA) does require employers to pay all of their workers in the United States at least the federal minimum wage of $7.25 per hour, the Act does provide exceptions for certain workers. Employees who normally receive tips, such as waiters and bartenders, can be paid a lower minimum wage of $2.13 per hour. This lower minimum wage is contingent upon the servers receiving enough tips that, between their tips and their wages, they are paid at least the federal minimum wage. In the event that a tipped employee does not receive enough tips to reach the federal minimum wage, the Act requires the employer to make up the difference.

Sometimes patrons fail to leave a tip because they are misled by a “service charge” on their bill. A service charge, rather than a tip or a gratuity, is a compulsory charge on a bill which goes to cover additional expenses for a meal, such as music and setup. It does not go to the wait staff, but rather gets distributed among the restaurant’s managers and higher employees. A gratuity, on the other hand, is voluntary and entirely up to the patron’s discretion and goes directly to the individual server. Many customers at restaurants have been misled into thinking that they are leaving a tip for their server when they see a gratuity charge on their bill when, in fact, the wait staff does not receive any of that money.

This allegedly happened at the Crown Group Hospitality restaurants of celebrity chef John DeLucie. Although the restaurants comprise some of the most expensive eateries in New York City, several members of the wait staff allege that they have been paid less than the federally mandated minimum wage as a result of the service charges that appear on customers’ bills.

The wage and hour lawsuit alleges that the wait staff had gaps in their paychecks and that customers were supposedly led to believe that the service charge was to be distributed among the wait staff. New York law does allow for restaurants and event companies to charge their customers a service charge, but the law requires that the bill must make it clear that the service charge is not a gratuity and that it will not be distributed among the wait staff. The lawsuit alleges that this was not made clear on the restaurants’ bills, which allegedly misled customers and resulted in the wait staff allegedly going without tips and getting paid less than the federal minimum wage.

The lawsuit is seeking lost wages for the plaintiffs as well as an enforcement of New York’s service charge regulations so that customers are made aware of the fact that the wait staff does not receive any money from the service charge. The lawsuit was filed a year ago, but has just recently gained media attention. It is one of many wage and hour lawsuits which have been on the rise lately. Many employment attorneys believe that the violations began during the recent recession when businesses were trying to cut costs and employees were too afraid to speak out for fear of losing their jobs. Now that the job market has stabilized somewhat, an increasing number of employees have begun to fight back.

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While the federal Fair Labor Standards Act (FLSA) requires that all employees working within the United States be paid at least the federal minimum wage of $7.25 per hour, there are certain exceptions to this rule, including servers such as waiters and bartenders. Because these types of employees frequently receive tips from patrons in addition to their wages, the law allows employers to pay these workers less. However, the tips and wages that the waiter receives must add up to at least $7.25 per hour, otherwise the employer is required to make up the difference.

In some instances, a company will charge its customers an automatic gratuity of a percentage of the total bill, usually twenty percent. This is legal so long as the employees actually receive this money. More and more wage and hour lawsuits have been filed lately which allege that employers are charging their customers a gratuity without then giving that money to their servers.

Recently, Robert Atkins, a former bartender for Metronome, the Manhattan events company, filed a wage and hour class action lawsuit against his former employer. The lawsuit alleges that, despite the fact that Metronome added a twenty percent gratuity charge to all of its bills for the banquets it ran in Manhattan, Atkins and other servers never saw any of that money. Instead, Atkins was allegedly paid a flat rate of $150 per event. While such a rate is high enough to be within the parameters of the FLSA, Metronome violated the law by charging its customers a gratuity which was not actually given to the employees who worked as servers at Metronome’s events.

Atkins began working for Metronome in 2010 and continued working for the events company through 2013. In that time, he worked about 140 events hosted by Metronome, including a birthday party for Johnny Depp, a Miss Universe event commissioned by Donald Trump, and a New York Film Critics Circle Awards event with Angelina Jolie, Brad Pitt, and Meryl Streep.

Based on the number of events that he worked and the gratuity charges that Metronome made in that time, Atkins alleges that the company owes him as much as $375,000. Depending on how many other current and former Metronome employees decide to join the class, the total back wages that Metronome might be made to pay could easily reach millions of dollars.

The lawsuit further alleges that Metronome deceived its patrons into thinking that the bartenders were tipped when, in fact, they were not. It is this deception, more than the actual failure to pay the bartenders their tips, that constitute a violation of the law. Not only is it unfair to the bartenders who do not receive their tips, but it is also dishonest to the patrons who have already paid a fee to the event company before the gratuity. Had Metronome simply left the gratuity charge off of its bills, it still could have paid its bartenders a flat rate for each event without any tips and remained within the parameters of the law.

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