Mario Batali Pays $5.25 Million in Employee Wage and Tip Lawsuit – Regulations Inside

Some Facebook friends led by such pains in the asses as Henry Alexander Dumas and Susan Anton regularly prod me to write about various wrongdoings by evil doers. The reported settlement by restauranteur Mario Batali and his partners over a wage/tip dispute is their latest peeve for Steve to explore. It seems that workers at Mario’s restaurants have been forced to share their tips with sommeliers – and that isn’t allowed. Other infractions, like choosing not to pay employees a required extra hour of pay after the 10th hour of labor, were also cited. Mr. Batali is reportedly settling for $5.25 million.That’s a whole lot of jars of Mario Batali Marinara Pasta Sauce. This settlement is a wake-up call to the industry. The bad practices of this crew regarding employers encroaching on employee tip pools is merely the tip of the industry iceberg. This huge precedent has law firms salivating on the next group of former or current disgruntled employees to step up and cry foul. I believe that a great deal of the business is not in compliance with current law. I’m not going to name names as I am friends with most, but I will list the most common "misunderstandings" and the corresponding New York State Labor Department regulation.

Who shares in the tip pool, the core of the Batali suit, is an industry mess waiting for the right lawyer to meet the right pissed-off employee. Many establishments find creative ways to supplement managers’ pay, door staff pay, and even line their own pockets off the tips of the waitrons. In bottle service establishments, these employees often score big. It is not unusual for a waitron in a high-profile establishment to take in more than a thousand dollars on a good night. That doesn’t mean they are not entitled to $1,001 or more if the rules are followed. I have heard instances where a whale (a hugely-spending customer) has bought hundreds of thousands of dollars worth of bottles but the staff received an unusually smaller percentage of the gargantuan tip. Many places give back to promoters and door hosts and door people and celebrity wranglers who are not entitled to a cut. I must note that the really buttoned-up places are very careful to do things right. It’s usually the second-level places that cheat. I have seen an extra line put into the physical receipt that specifies an optional charge or tip for otherwise ineligible staff. The regulation seems clear that a direct interaction between the customer and the employee must occur and the customer must know that that employee is participating in the tip pool or that that employee could reasonably be assumed to be part of it.
Here’s the regulation:
                 146-2.14. Tip sharing and tip pooling.
   (a) Tip sharing is the practice by which a directly tipped employee gives a portion of his or her tips to another service employee or food service worker who    participated in providing service to customers and keeps the balance.
   (b) Tip pooling is the practice by which the tip earnings of directly tipped employees are intermingled in a common pool and then redistributed among directly and indirectly tipped employees.
   (c) Directly tipped employees are those who receive tips from patrons or customers without any intermediary between the patron or customer and the employee.
   (d) Indirectly tipped employees are those employees who, without receiving direct tips, are eligible to receive shared tips or to receive distributions from a tip pool.
   (e) Eligibility of employees to receive shared tips, or to receive distributions from a tip pool, shall be based upon duties and not titles. Eligible employees must perform, or assist in performing, personal service to patrons at a level that is a principal and regular part of their duties and is not merely occasional or incidental. Examples of eligible occupations include:
(1) wait staff; (2) counter personnel who serve food or beverages to customers; (3) bus persons; (4) bartenders; (5) service bartenders; (6) barbacks; (7) food runners; (8) captains who provide direct food service to customers; and (9) hosts who greet and seat guest
Some establishments takes the credit card company’s service charge out of the tip pool. They cannot do this. They can take a proportion of the charge out as defined below. Many places take the whole 5 percent when only 1 is allowed.
146-2.20. Tips charged on credit cards. When tips are charged on credit cards, an employer is not required to pay the employee’s pro-rated share of the service charge taken by the credit card company for the processing of the tip. The employer must return to the employee the full amount of the tip charged on the credit    card, minus the pro-rated portion of the tip taken by the credit card company.
Example: The bill totals $100.00 exactly. The customer leaves, on their credit card, the $100.00 payment of the bill, as well as a $20.00 tip. Both the tip and the bill must be processed through a credit card company which charges a 5% fee on all transactions. The total charge levied by the credit card company on the $120.00 charge is $6.00. Of that $6.00, $5.00 is for the bill (5% of $100) and $1.00 is for the tip (5% of $20). The employer must provide the employee $19, which represents the $20 tip minus $1.00 pro- rated employee’s portion of the surcharge).
Some establishments charge a waitron if the customer skips out on the bill. The rules say that can’t be done. Some joints stiff an employee of wages or tips if they quit or flip off a customer.
             146-2.7. Deductions and expenses.
       (a) Employers may not make any deductions from wages, except for credits authorized in this Part and deductions authorized or required by law, such as for social security and income taxes. Some examples of prohibited deductions are:
      (1) deductions for spoilage or breakage; (2) deductions because of non-payment by a customer; (3) deductions for cash shortages or losses; and (4) fines or  penalties for lateness, misconduct, or quitting by an employee without notice.      
Most places don’t pay new employees while they are trailing or training. The mantra goes "everybody starts this way."
            146-2.11. Learner, trainee, or apprentice rates. Any employees whom an            
            employer designates learners, trainees, or apprentices must
            nonetheless be paid at least the minimum rates prescribed in this Part.
Some places think by using the words service charge that they can get around this issue.
146-2.18. Charge purported to be a gratuity or tip.
Section 196-d of the New York State Labor Law prohibits employers from demanding, accepting, or retaining, directly or indirectly, any part of an employee’s gratuity or any charge purported to be a gratuity.
         (a) A charge purported to be a gratuity must be distributed in full as gratuities to the service employees or food service workers who provided the service.
         (b) There shall be a rebuttable presumption that any charge in addition to charges for food, beverage, lodging, and other specified materials or services, including but not limited to any charge for “service” or “food service,” is a charge purported to be a gratuity.
These regulations were written with a restaurant mentality and are often a little less reasonable in places where food isn’t served. Still they exist and the Batali lawsuit settlement must have vengeful minds thinking of getting back at places that fired them. Clubs must review their practices or face debilitating legal action. Even then, it may be too late to prevent fines for past indiscretions. The rules and penalties for ignoring them or bending them seem to be enforceable going back as much as six years. With many places including restaurant components as part of their marketing, regulation will be more scrutinized and enforced. Wages and regulations often vary for hotel employees. Here, too, a gray area may exist for the distribution of the green.