Chili’s Food Servers Risk Being Cheated by Unlawful Tip Pooling

A new class action lawsuit brought by food servers working at Chili’s Grill & Bar® accuses restaurant conglomerate Quality Dining, Inc. of wrongfully denying them compensation in violation of state labor laws.

A group of servers employed at Chili’s locations across Pennsylvania alleges that they were the victims of unlawful tip-sharing practices that failed to comply with the state’s $7.25 per hour minimum wage requirement. The servers claim they were paid only $2.83, and that a “tip credit” scheme failed to make up the $4.42 per hour shortfall.

Although the law does permit employers to utilize tip credits to satisfy minimum wage laws, food servers cannot be compelled to share tips with other restaurant workers who do not “customarily and regularly receive tips.” The Chili’s servers argue that they were forced to share tips with food expediters and that the company required those expediters to clock into its timekeeping system as “food runners” to disguise their participation in the tip pool. By improperly distributing the shared tips across a greater number of employees, the servers allege that their tips were diluted, resulting in less pay than they rightfully earned.

Quality Dining operates approximately 46 Chili’s Grill & Bar® restaurants in Pennsylvania, Delaware, Indiana, Michigan, New Jersey, and Ohio.

Wage theft and compensation abuse in the restaurant industry is not new. In July 2013, the U.S. Department of Labor’s Wage & Hour Division issued Fact Sheet #15, in which it alerted tipped employees of certain abuses prevalent in the service industry. In particular, the publication specifically condemns employer practices of not paying tipped employees all of their tips or requiring them to pool their tips with non-tipped employees:

• Retention of Tips: A tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit. The FLSA prohibits any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. For example, even where a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turn over his or her tips to the employer.

• Tip Pooling: As noted above, the requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips. The FLSA does not impose a maximum contribution amount or percentage on valid mandatory tip pools. The employer, however, must notify tipped employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each tipped employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.

• Dual Jobs: When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a maintenance person and a waitperson, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing. However, where a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

The attorneys in Sommers Schwartz’s Wage & Hour Litigation Group are investigating claims of unlawful tip pooling at Chili’s restaurants in Michigan and elsewhere. If you are or were a food server and believe you were the victim of an improper tip credit scheme, please contact us today – the law gives you only a limited amount of time to seek damages and compensation.

[contact-form-7 id=”2393″ title=”Employment Contact Form”]