Articles Posted in Tips

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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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Instead of having customers leave an optional tip for wait staff, some companies have opted to add a mandatory service charge to their bills. This is particularly popular in the restaurant industry for tables with large groups of people. In this case, the money from the service charge goes to the company’s management, rather than the employee. The company is then supposed to distribute the money from the service charges among the wait staff, but this does not always happen. Some states, including Massachusetts, Hawaii, New York, and Washington, require companies that include a service charge in their bill to explicitly state that the service charge goes to management, rather than the wait staff.

The Harvard University Faculty Club allegedly violated this law by collecting a service charge from its patrons and failing to provide any disclaimers in connection with the service charge, explaining that it went to management, rather than the wait staff. In addition, the University allegedly failed to distribute the money it collected from those service charges to its employees. As a result, the servers at Harvard University Faculty Club filed a wage and hour class action lawsuit to recover the money that they earned from working for the university, but were never paid.

Angel Hernandez, the named plaintiff in the class action lawsuit, alleges that there was a collective bargaining agreement which existed between the University and the wait staff. This agreement allegedly required the servers to work for the university, but to remain quiet on the issue of gratuity charges. Patrons of the University’s Faculty Club were allegedly told not to tip the wait staff. Despite the fact that the University regularly charged its customers between 18 and 22 percent of their total purchase, none of that money was ever distributed to the wait staff.

Harvard University has tried to argue that the agreement was actually beneficial to the servers, because they were unionized. The district judge rejected that argument though, pointing to the fact that the waiters were asked to remain silent on the issue of tips as evidence that the university knew it was acting in violation of the law.
Harvard University tried to claim that, as part of the collective bargaining agreement, the servers had agreed not to sue the university. The university tried numerous times to get the court to dismiss the case on grounds such as these, but the judge denied all of those motions.

Harvard University also tried to argue that its failure to distribute the money from the gratuity charges did not harm the waiters because they were paid more than double what the average restaurant server is paid. Hernandez alleges that this is not true, pointing to the fact that he has been working at the university’s faculty club since 1999, and according to the terms of the collective bargaining agreement, has always been paid a flat hourly rate which does not match Harvard University’s numbers.

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It is common practice in the United States for certain service employees to receive tips, such as bartenders and waiters. Because these employees receive tips as part of their compensation, their employers are permitted to pay them at a rate below the minimum wage, although this only holds true if the employee’s wages and tips add up to at least the required minimum wage.

Banquet servers are usually not included in this category. Instead, they get paid a flat hourly rate which is usually above the minimum wage. This is legal so long as the customers are not charged for what they are led to believe are tips for the servers when, in fact, the servers do not receive tips.

This allegedly happened at banquet halls owned by Mallozzi Group. Ryan Picard, a former banquet server for the restaurant and banquet company, recently filed a class action wage and hour lawsuit against his former employer. According to Picard, Mallozzi Group allegedly charged is customers a “20 percent service personnel charge” when renting out banquet halls. Although the servers never saw any of that money, Picard alleges that any “reasonable” customer would be led to believe that the money was a gratuity charge for the waiters.

Picard further alleges that he and other banquet servers for Mallozzi Group were told to lie to customers. If a customer asked a server if they received tips, the server was “to respond, as instructed by the defendants, that they did receive tips.”

The complaint points to a recent decision by the New York Court of Appeals which states that, any “charge purported to be gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.” Similarly, New York’s tip-appropriation law states that all tips are to be paid directly to the servers. Employers in the state of New York are not allowed to “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.”

Based on this New York law, and previous decisions reached by New York courts, Picard alleges that, as a result of the mandatory service charge, he and other similarly situated workers are entitled to more than $1 million in unpaid tips.

Bobby Mallozzi, one of the owners of Mallozzi Group, which owns and operates a banquet hall in Rotterdam, New York, a restaurant and banquet hall in Albany, New York, and food service operations at two golf courses in addition to a bakery and restaurant in Schenectady, New York, denies that the company has done anything wrong. Instead, he insists that the company has been including the charge in its bill for years, and that neither the word “tip” nor “gratuity” were ever used. He also stated that the servers’ wages started at $12 an hour and went up to $19 an hour. He said that Mallozzi Group makes it clear to their servers that they get paid a flat hourly rate without tips.

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When we talk about wage and overtime lawsuits, many people do not consider the fact that tips are included in that category. However, tips can be a very contentious issue, especially because employees who earn tips are, in most states, subject to a lower minimum wage than other employees. This is where the attorneys at Chicago Overtime Law Center are here to help.

A recent case involving tips was filed by Diamonde Grant, who worked as an exotic dancer at the Oasis Nite Club in Baltimore, Maryland. The lawsuit alleges that Grant was required to pay a portion of her tips to other employees who do not normally receive tips, such as DJs and security guards. The amount she ended up paying them could be as high as $80 on weekend nights before she was permitted to take her own share of the money. The lawsuit, filed in U.S. District Court, is seeking $200,000 for the money she was forced to pay other employees between 2009 and 2012.

In Maryland, as in many other states, service employees who receive tips must have received enough money from those tips to at least meet state minimum wage requirements.

In general, courts do not look favorably upon cases of tip pooling. Not only is it unfair to the employees who work hard to earn their tips, but it is also deceptive to the patrons who believe that the entirety of the gratuity they choose to pay is going to the person who served them. Other common cases of tip pooling, which have made it to the courts in recent years, include restaurants where waiters are made to share their tips with busboys, chefs, and even shift managers.

Ms. Grant is not the only exotic dancer to file a lawsuit against her employer for tip pooling. Another similar case has been discussed on this blog and other exotic dancers have begun filing similar cases in Maryland, as well as other states.

Another difficulty that exotic dancers face is the fact that their employers often misclassify them as independent contractors. As this blog has discussed, many employers implement this in order to avoid paying their employees overtime wages. However, in order to be classified as an independent contractor, employees must fit certain requirements. These requirements include being able to choose their own hours and having control over what they wear while they are at work. In order to qualify as an independent contractor, an employee must also have a certain level of control over the environment in which they work.

However, this is rarely if ever, the case with exotic dancers. They are frequently told when and where to work and, according to Grant’s lawsuit, she was regularly required to attend meetings at the Oasis Nite Club. Such regular meetings would never be required of an independent contractor. Similar cases involving misclassification of employees have pointed out that independent contractors would not face any disciplinary action as a result of their contracts. As one might expect, such is not the case with tipped employees.

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This blog has previously discussed cases where employees sue, not only for unpaid overtime, but for money lost in illegal tip pools. According to the labor law, employees are entitled to the full benefit of the tips they earn and cannot be induced to share that money with other employees.

One company, which has recently been taken to court for this alleged illegal practice, is Coyote Ugly Saloon Development Corp. The class-action lawsuit was filed in Tennessee Middle District Court but now involves current and former employees of the company from all over the country. The plaintiffs are suing for unpaid overtime as well as an illegal tip pool.

According to the lawsuit, security guards for the company were permitted to claim five percent of the tips earned by the other employees, such as bartenders. Certain security personnel were permitted to claim 10 percent of the tip pool if they served as “barbacks” (if they assisted bartenders, restocked the bars, and cleaned the counters). The company argues that the security guards fulfill an important role in assisting clients and promoting the overall theme of the bar. In this way, the company claims, the security personnel earn their share of the tips. The bartenders disagree.

Now the plaintiffs are claiming retaliation from their employer as a result of their involvement in the lawsuit. Such retaliation is also prohibited by law. One of the plaintiffs, Sarah Stone, who served as a bartender-dancer at the Coyote Ugly facility in Oklahoma City, alleges that one of the regional managers threatened her in a status updated to his Facebook page. The manager, Daniel Huckaby, admitted to being intoxicated on the night that he posted the alleged threat on Facebook. He says he has no memory of putting up the post.

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Among the issues of overtime, this blog frequently discusses the problem of employers illegally withholding pay from their employees. Recently, more than 100 employees of a salon settled a lawsuit with their employer, Natalie Salon
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The salon, owned by Natalie Phan and her husband, Bill Dong, allegedly refused to provide overtime compensation or meal breaks. According to California labor law, employers are required to provide at least a 30-minute uninterrupted meal break for every five hours worked and at least a 10-minute break for every four hours worked. If, for whatever reason, an employer does not receive these breaks in full, the employer is required to compensate the employee for one hour’s worth of their normal hourly wage for every day that a break is missed. If an employee ends up working more than eight hours in a single day or more than 40 hours in a week, the employer is required to provide one and one-half times the employee’s normal hourly rate for each hour of overtime they work.

In addition to allegedly failing to provide overtime compensation and meal breaks, the owners of the salon also allegedly withheld parts of the employees’ tips and deducted from employee wages for minor infractions, such as dropping nail polish.

The lawsuit has settled for $75,000. The next step is for the 125 employees to review the settlement and determine if they want to remain part of the class or to opt out and sue separately. At the next court date, set for June, eligibility and distribution will be decided.

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This blog recently discussed a case in which exotic dancers filed a class action lawsuit against their employer for allegedly misclassifying them as independent contractors, rather than employees. The case also claims that, although the dancers made nearly $50,000 per year in tips, the club allegedly forced them to put their tips into a “tip pool” which illegally included employees such as managers and bouncers.
The settlement of nearly $13 million for that case has recently been approved by a federal court. It took nearly two years for lawyers to prove that the case fairly and properly represented all dancers in the class. Now that the settlement has been approved, it includes an agreement that the lawyers on each side will not discuss the case for at least six months.

With the settlement finalized, each of the 14 dancers who agreed to participate as named plaintiffs in the case will receive an “incentive award” of $1,000 to $15,000 each. This is to reward them for the time they spent on the case and for the personal and professional risks they took in allowing their names to be used.

The rest of the $12.97 million settlement will be divided up among dancers in six states who filed claims. After attorney fees and incentive awards are deducted, dancers in California will get 50.14% of the money remaining, those in Nevada will get 42.69%, and 7.16% will go to dancers in Kentucky, Idaho, Texas, and Florida.

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Tip pooling can be an effective way to make sure that everyone who helps customers gets a share of the tips given, particularly in coffee shops where customers are often helped by multiple people to get a single cup of coffee. However, as this blog has mentioned, companies need to be careful to make sure all managers are excluded from the tip pool.

Starbucks has been dealing with a class action lawsuit filed by and on behalf of its Massachusetts baristas. The lawsuit claims that shift supervisors cannot legally be included in a tip pool because they are managers which are, by definition, excluded from tip pools under Massachusetts law.

According to Starbucks though, the shift supervisors are wait staff, rather than managers, and that the only substantial difference between shift supervisors and baristas is that baristas are part-time hourly employees while shift supervisors are full-time salaried employees.

These claims were rejected however and the baristas were granted class status in February of 2011 when a judge ruled that shift supervisors have at least some managerial responsibilities. Because of these duties, they are ineligible for the tip pool under the Massachusetts statute. The class includes everyone who worked as a barista at Starbucks in the state of Massachusetts from March 25, 2004 to February 8, 2011.

Starbucks continues to dispute this ruling, saying that, unlike managers, neither baristas nor shift supervisors have the authority to compel obedience if a co-worker disobeys a direction or request. Starbucks has also pointed out that the representatives of the class do not properly represent those employees who were baristas during the class period but have since been promoted to shift supervisors and are currently reaping the benefits of the tip pool.

Despite these arguments, Judge Gorton of the District of Massachusetts awarded $14.1 million to the class. Starbucks has recently appealed that decision in the U. S. Court of Appeals for the First Circuit where it is awaiting review.

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As this blog has previously discussed, for an employer to withhold tips from employees is against the law and subject to legal action. A class action of nine drivers has filed a lawsuit in Utah against their employer, All Resort Express, for doing just that.

According to the lawsuit, whenever customers paid with anything other than cash (such as a credit card) the tips were given directly to the company, rather than the driver. Allegedly, the company kept a significant percentage of those tips. The lawsuit also alleges that All Resort Express invented several means of keeping the tips, such as claiming that it was a service fee, or that the drivers were not tipped employees.

This practice of withholding tips affects all drivers of All Resort Express and has allegedly been going on for years. The lawsuit also alleges that drivers were threatened if they complained about this policy.

All Resort Express maintains that they have done nothing wrong and they intend to prove that in court.

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Sometimes employers who hire tipped employees will hire them in “dual jobs”, as in jobs where the employees perform both tipped and non-tipped work. Non-tipped work would include things like cleaning the bathrooms, taking out the trash, polishing paneling, etc.

The Illinois division of Applebee’s, AppleIllinois LLC, which operates 34 Applebee’s Neighborhood Bar and Grill restaurants, recently lost in court in a class action claim against a class of current and former tipped employees. The employees (made up of servers, bartenders, and hostesses) alleged they regularly spent up to 20% of their time performing non-tipped work for which they were not paid minimum wage.

The lawsuit also alleges that the workers had to contribute 2.5% of sales per shift to a tip pool. This often exceeded 15% of total tips actually received.

AppleIllinois responded with a motion to decertify the class, which was rejected. Now the judge has officially ruled in favor of the workers for partial summary judgment.

U.S. District Judge Geraldine Brown declared that the “evidence demonstrates that AppleIllinois employees working at tip credit rates did those duties for much longer periods of time than can be fairly characterized as occasional, incidental or insignificant.”

Judge Brown also pointed out that AppleIllinois executives recognized that some tasks are clearly outside a tipped occupation. The duties which the tipped employees were performing fell under the category which the executives themselves agreed were non-tipped duties.

AppleIllinois feared that enforcing the dual job regulation would prohibit “a team-oriented approach to serving customers.” On the contrary, Judge Brown argues, it simply means that tipped employees get paid minimum wage when they are required to perform the work of minimum wage workers.

AppleIllinois has been ordered to compensate the class members for non-tipped work which they performed. Judge Brown ruled that the plaintiffs may establish damages at a future hearing.

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