Don’t Be The Next Dinosaur

Dinosaur BBQ was New York’s most famous barbeque joint. Local entertainment, genuine barbeque and craft beer were the formula for long wait-lists and high profits. One day in early 2015, the owners were served with a federal lawsuit alleging labor law violations including paying tipped workers the sub-minimum (tip credit) hourly wage rates for non-qualified “back of house duties” such as brewing coffee, cleaning, setting up stations, and stocking (filling ketchup bottles or salt & pepper shakers). Although national news had reported similar cases against national chains such as Chipotle and TGI Fridays, they never expected to be embroiled in such a public scandal. The legal fees did not hurt as much as the negative public relations and media attention.

Why does it matter? The publicity of this lawsuit is likely to get a lot of low wage employees visiting attorneys to find a big pay day and stick it to their employer. To avoid being hit with a federal lawsuit like this, restaurant owners and managers need to be familiar with the nuances of the labor law for restaurant tipped workers. They should also understand split shift rules, break requirements and meal regulations. These areas are frequently the source of violations and end up in fines and lawsuits.

The tip credit is allowed for work performed where the difference is paid to the worker by tips. The average hourly wage must be at least the full minimum wage when tips and the tip credit wage are taken together. For work where tips are not being earned, the full minimum wage must be paid. These include typical pre-shift and post-shift duties of servers. I know. I understand. It is true that these are traditional responsibilities expected of serving staff at most restaurants, however, times are changing and regulatory authorities are enforcing the laws with more vigor and frequency. To put it lightly, there is a target on you as a restaurant employer. Restaurant employers are an enforcement priority in 2015 for the labor department, tax department, and immigration authorities. Years of sliding by or being under the radar are long gone. Your statistical chance of being the subject of enforcement activity are high enough that my opinion of any attempt to ignore this threat in favor of the status quo is a deposit in my children’s college fund. If you want to avoid a costly lawsuit or regulatory penalties, now is the time to review your pay practices with your employment attorney or to read my blog at describing what you need to know to stay in compliance. As the old adage goes, an ounce of prevention is worth a pound of cure.