Failure to comply with federal tip-pooling rules is costing two restaurants a bundle this week.
La Tolteca and its owner, Carlos De Leon, were ordered by a federal court to pay $1.3 million to 55 workers who participated in a tip pool run by the Wilkes-Barre, Pennsylvania, restaurant. According to the U.S. Department of Labor (DOL), bartenders and servers were required to contribute a portion of their gratuities to the pool, as per the customary arrangement. But the restaurant didn’t follow the hands-off policy warranted by regulations. The money went first to the establishment rather than to some sort of kitty that couldn’t be drained by management.
DOL did not accuse La Tolteca of pocketing the money. Rather, the place failed to keep records of where the funds went after being turned over to management, so it couldn’t prove the pool participants were getting their share and that all the money went to workers.
“Misuse of all or any portion of tips by management violates workers’ rights,” commented DOL Wage and Hour Administrator Jessica Looman. “This is a common concern in the restaurant industry and the U.S. Department of Labor remains committed to ensuring all workers are paid all of their rightful wages and that businesses do not gain an unfair advantage over competitors that abide by the law.”
The restaurant was also sanctioned for not providing overtime pay to three back-of-house workers when they worked more than 40 hours per week. DOL did not say how much of the $1.3 million in back wages and damages were the result of that payroll lapse.
The amount was determined in a consent judgment, meaning the plaintiff accepted the terms in lieu of having the matter litigated in a trial.
A day after the action against La Tolteca was announced, DOL announced that the Friendship Diner in Evanston, Illinois, had agreed to pay $390,000 in back pay and damages to 44 employees, the settlement set by a federal district court.
The restaurant and its proprietor, Bardhyl Shabani, had been accused of violating a number of federal labor standards, including the rules for pooling tips. DOL alleged after an investigation that the establishment was illegally requiring servers to tip out $10 per weekday shift and $15 per weekend gig to management.
In addition, Shabani was accused of failing to pay the overtime and $7.25 minimum wages that some workers were due. Under federal law, tipped workers can be directly paid just $2.13 an hour if gratuities raise their intake to at least $7.25 and less than 20% of their shift time is spent in side work or other activities for which they’re not tipped.
DOL also alleged that Shabani had harassed and threatened employees who refused to give investigators false information about how the tip pool was run. It successfully sought a restraining order and injunction against the proprietor to keep him from retaliating against the workers.
The federal regulations governing tip pools are precise and complicated. The underlying principle is that tips belong solely to the servers who earned them and the proceeds cannot be diverted to defray operating costs.
State regulations may differ from the federal rules, and some jurisdictions ban tip pools outright.
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