Certification Granted to Restaurant Employees Claiming Tip-Credit Violation

On May 8, 2014, the United States District Court for the Northern District of Illinois issued a Memorandum Opinion and Order in Frebes, et. al. v. Mark Restaurants, LLC, et. al. granting conditional certification on the Fair Labor Standards Act (FLSA) claim brought by tipped employees who claim they were required to pay a portion of their tips to the restaurant which, in turn, distributed those tips to non-tipped employees.

James Frebes and two other employees filed their lawsuit challenging the tip pool at the Tavern at the Park restaurant in which they were employed. Tip pools are not inherently unlawful, however, the FLSA requires that only tipped employees be allowed to participate in these tip-sharing arrangements. Here, the employees alleged that servers, bartenders, and bussers were required to participate in a tip pool that redirected a portion of the tips to non-tipped employees, specifically “food runners” that were merely expediters or expos who performed all their duties in the kitchen and had no customer interaction. It is this lack of customer interaction that typically differentiates non-tipped employees from tipped employees as non-tipped employees lack the opportunity to earn tips from customers or clients as part of the performance of their work duties.

At the initial certification stage, the restaurant opted not to challenge whether the tip pools existed or were administered in the manner alleged by Mr. Frebes and his co-workers. Instead, the restaurant argued the employees were not similarly situated because they have different job duties and responsibilities, different pay rates, and made different contributions to the tip pool depending on whether they were servers, bussers, or bartenders. The court rejected these arguments, finding that the employees were not required to show they held identical positions, but rather that they were subjected to “a common plan of forced distribution of a portion of their tips to non-tipped employees in violation of the FLSA.” Because they met this showing, the court granted conditional certification of the class.

If the employees prevail on their claims, their recoveries could be substantial. Employers who opt to utilize the tip credit provision of the FLSA are able to compensate employees at a reduced hourly rate of not less than $2.13/hour. However, when the tip credit provision is not administered correctly by the employer as is being alleged in Frebes, the employee may be entitled to all of the tips he or she contributed to the pool in addition to the full $7.25/hour minimum wage. Depending on the length of time with the restaurant, the number of hours worked, and the amount of tips earned, it is not uncommon to see unpaid wages in the tens of thousands of dollars per employee even before the statutory penalties are factored in. While wage theft like that alleged in Frebes may seem minor to some people, all tipped employees should take note of how they are being compensated and not be afraid to speak with an attorney if they feel like they are being shorted or otherwise taken advantage of by their employer.