Category Archives: Management And Ownership

“… a restaurant  is permitted to require front-of-the house employees to “pool” their tips, the  pool may be illegal if it is shared with employees who interact with customers  only indirectly. And if the pool is illegal, regardless of the reason, the  restaurant can incur enormous liabilities to employees, even if those employees  each collect hundreds of dollars per week in tips, which is often the case…”

The hospitality industry is under siege by attorneys who stand to gain big  fees from huge class-action settlements. The same gains do not apply, however,  to the waitstaff and other restaurant employees on whose behalf these lawsuits  are filed.

On a federal level, wage and hour claims are brought under the Fair Labor  Standards Act, passed in the 1930s to address intolerable conditions, such as  child labor and six-day workweeks of 10- to 12-hour days without overtime pay.  Such conditions were long ago eradicated from most restaurants and other  establishments, but the FLSA, as well as state wage and hour laws, have  continued to expand by prohibiting common practices that many eateries have  followed for years.

When faced with class actions, most restaurants have few options. Potential  damages often amount to double the wages or tips owed, dating back from two to  six years. Prejudgment interest rates can be as high as 9%, depending on the  state, and plaintiffs’ “reasonable” attorneys’ fees can be enough to put many  operations out of business. Not included here are the costs of defense counsel,  the hit to the restaurant’s reputation, and the disruption of daily operations.  For many owners, settling the plaintiffs’ claims, regardless of their merit, is  the most reasonable business decision.

Read more: http://www.crainsnewyork.com/article/20120916/OPINION/309169972#ixzz26e5yTkfQ