Restaurant Chains Hit with Wage Theft Lawsuits

05/11/2017 03:37 pm ET

While there has been much attention surrounding the Fight for $15 and the minimum wage increase for restaurant workers, the issue of wage theft in restaurants has received scant press coverage despite a number of significant lawsuits and wage theft settlements. In the past five years, virtually every major restaurant chain has been hit with pay lawsuits for a variety of pay violations, including shaving hours, misappropriating tips, and failing to pay the proper wage rate for side work. The unsavory truth is that many so-called “fast casual” restaurants have been playing fast and loose with their obligation to pay workers according to the wage laws.

One common complaint of employees at chain restaurants is the systemic practice of shaving worker hours and requiring both front-of-the-house and back-of-the-house employees to work off the clock. Ruby Tuesday settled a time shaving case in 2014 for $3 million. In the Ruby Tuesday case, the restaurant attempted to avoid paying servers and bartenders overtime by requiring them to fulfill “checklists” during pre and post shifts that were not recorded on the clock. When an employee’s recorded hours exceeded more than forty in a week, time records were altered or “shaved” down to forty hours. A lawsuit against Outback Steakhouses for requiring servers and bartenders to fulfill a pre-shift known as “Outback Time,” was also settled for $3 million. The pre-shift work in the Outback case was to be completed before employees were allowed to clock in and begin recording their time. Meanwhile, a Papa John’s franchise in New York was ordered by New York State Attorney General Eric Schneiderman to pay over $2 million dollars to its workers for rounding down hours to the whole number, not paying overtime rates, paying workers the “tipped” minimum wage when they predominantly performed untipped work, and failing to reimburse their employees for the purchase and maintenance fees of the bicycles used for deliveries.

Another disturbing practice in the restaurant industry is the misappropriation of front of house workers’ tips. Some restaurants engage in overt tip theft by skimming a percentage or set amount from their servers’ tips. In chain restaurants, misappropriation of tips typically occurs when they require servers, bussers, bartenders, barbacks, food runners, captains, and other front of house workers to share their tips with non-service employees who do not customarily and regularly receive tips. Non-service employees include expediters, dishwashers, cooks, chefs, janitors, and managers—all positions with little to no direct customer interaction. When restaurants require such tip sharing, they lose the privilege of taking a “tip credit” and paying their workers a tipped minimum wage, which is as low as $2.13 per hour in many states. Red Robin Restaurants in Pennsylvania forked over $1.3 million dollars because they required servers to share tips with expediters in the kitchen. Rosa Mexicano, the upscale Mexican restaurant chain, was recently hit with a nationwide lawsuit by its servers claiming they were required to share tips with “floaters,” workers who conducted miscellaneous tasks around the restaurant without ever having customer contact. Similarly, the Department of Labor ordered Johnny Rocket’s to pay 55 servers over $570,000 for requiring servers to pool tips with cooks and dishwashers.

Servers at chain restaurants are also attacking policies which require them to do excessive “side work” at a tipped minimum wage. The 80/20 rule under the Fair Labor Standards Act provides that restaurants cannot take a “tip credit” and pay the tipped minimum wage to workers for time spent performing non-tip producing duties that comprises more than 20 percent of a workweek. In a case against TGI Fridays, the servers claimed that they were spending more than 20 percent of their week “cleaning the restaurant, preparing food in bulk for customers, cutting produce, refilling condiments, and stocking and replenishing the bar and service areas.” Fourteen TGI Fridays servers were paid $485,000 to settle their claims of 80/20 violations and off-the-clock work. Pizza Hut and Steak N’ Shake are other restaurant chains that are facing 80/20 lawsuits.

So, as the table is set for discussions about the tipped minimum wage for servers, and a $15 minimum wage for fast food workers, let’s not overlook that there is an epidemic of labor law violations occurring in the restaurant industry. Restaurants need to be more diligent to ensure that the rights of waiters, waitresses, cooks and other restaurant workers are protected. Increased compliance with existing laws and self-audits, which uncover wage theft violations, would serve the restaurant industry well.

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