The proliferation of wage and hour class actions throughout the United States over the past twenty years is well-documented. A recent federal court decision involving a class action brought under the Fair Labor Standards Act (FLSA) by approximately 750 servers against a chain of famous steakhouses in Texas offers another cautionary — and expensive — tale about the dangers of home-grown tip-pooling arrangements. Operating as Perry’s Steakhouse and Grille, the defendant employer implemented a tip-pooling program which required servers to share their tips with a number of different job categories of employees who worked before and after the respective locations were open to the public. In most cases, these “off-hour” employees were assigned cleaning and prep-related duties during the morning hours. So, unlike many other employers who have run afoul of wage and hour laws by retaining some portion of the tip pool for upper management or the “house,” in this particular instance, the employer just re-distributed some of the tip-pool collections to other non-management employees working in non-server roles as a retention tool.
But Wait — It Was for Other Hourly Workers Only!
While an employer’s motive routinely comes into play in employment lawsuits, the FLSA’s tip-pooling requirements remove that from the equation altogether (unless they are a serial litigant). The FLSA provides a tip credit exemption for employers in the hospitality industry under the following limited...
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