Hey, You Cooks and Dish Washers! Out of the Pool!
Posted on 09-Oct-07 by The Timekeeper
I was alerted to this issue by a post over at Jottings by an Employer’s Lawyer. Michael Fox there points us toward an article on the Austin Business Journal website about several Austin-area restaurants getting hit lately with lawsuits, all over the same issue.
It seems these restaurants were allegedly requiring servers to put money into a “tip pool” which was then distributed to kitchen staff. This allowed the restaurants to pay the kitchen staff less than the prevailing wage out of the restaurant’s pocket. In essence, the lawsuits claim servers and other tip-earning employees were being forced to subsidize the wages of the kitchen staff (who don’t normally earn tips — I mean, when was the last time you went in the back to tip the dish washer?).
Now, tip pools in and of themselves aren’t a problem. And paying tipped employees less than minimum wage isn’t even a problem (as long as the combination of tips and wages at least equals minimum wage). In lots of restaurants, tipped employees will pool a portion of their tips and share them back equally among all tipped employees, to ensure nobody suffers just because they had an off night, or luck of the draw sent them all the cheapskate customers. I actually kinda like that idea. It’s got a bit of that “we’re all in this same boat together” kinda spirit to it. And it’s perfectly legal, as long as all the employees participating in the pool normally receive tips as part of their work.
The problem arises when employers force tipped employees to share their tips with other employees who normally wouldn’t get tipped. That’s illegal under the FLSA — and has been for almost 50 years, according to Glen Carey of the Texas Restaurant Association, as quoted in the Business Journal article.
(By the way, it’s also illegal to deduct breakage fees for shattered dishes or glassware out of tips, or docking tips if customers skip out on tabs. From what I’m told, these are common practices in the industry, but illegal nevertheless.)
According to the article, if a restaurant has less than $500,000 in revenue, employees can’t come after it because the law is designed to protect “mom and pop” concerns. But for restaurants that do cross that threshold, the penalties can be severe — twice the difference between minimum wage and what was actually paid to employees. Depending on how many employees are involved, the liability could be in the millions.
Wouldn’t it just be easier, better business (and potentially a lot cheaper) to just pay people legally to start with? I’m just saying.
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