Tip-Pooling Allegations Result in $5 Million Judgment

Employment Attorney New York CityAbout 1,500 employees of 17 different Houlihan’s restaurants in New York and New Jersey brought allegations against the two companies that owned the franchises, claiming the owners cheated them out of wages to which they were entitled under federal wage laws from 2013 to 2015. The employees complained about the violations in 2015 and Houlihan’s agreed to a consent judgment with the Department of Labor (DOL) earlier this year, in which the companies do not admit fault but still agree to pay $5 million.

The employees and DOL alleged that the companies violated the Fair Labor Standards Act (FLSA) by:

  • Keeping portions of tips that rightfully belonged to employees
  • Including non-tipped employees in tip pooling arrangements
  • Failing to pay proper overtime rates when employees worked more than 40 hours in a week
  • Making improper deductions for meals from employee paychecks when they also required the employees to pay for their meals

Tip pools are not illegal in themselves. It is lawful for an employer to pool tips and redistribute them to employees if:

  • The tips are redistributed only among directly or indirectly tipped employees—meaning employees who provide personal or customer service as a principal and regular part of their job duties
  • Required tip pool contributions do not exceed what is customary or reasonable
  • Employees still take home at least the minimum hourly wage under New York City law
  • Tips are distributed to traditionally tipped employees, and neither an employer nor a supervisor stake a portion of the tips

In the Houlihan’s case, employees alleged that non-tipped employees such as custodians and kitchen staff would regularly share in the tip pools. In addition, supervisors and owners would also take tips from the pools in violation of the law.

Tip credits, tip pooling, and tip sharing are unique to those in the service industry. The laws overseeing tipped employees can confuse anyone, and employers may regularly try to take advantage of the situation by denying tipped employees their rightful income.

Too many people fail to ever take any legal action for wage violations because they believe the process will prove too difficult, won’t succeed, or may jeopardize their jobs. The Houlihan’s case goes to show that wronged employees can hold companies—large or small—liable for wage violations.

Labor laws are strict, and every employer is expected to comply and pay employees any back pay if they violated the law. Never hesitate to discuss your specific situation with a skilled wage and hour lawyer if you suspect a violation.

Contact an Experienced New York City Wage Law Attorney With Any Questions or Concerns

Wage issues can often prove complicated, especially if you are a tipped employee. Braverman Law PC regularly evaluates the rights of tipped employees and advises them of any viable legal options. If you would like to schedule a consultation, please feel free to call (212) 206-8166 or contact us online today.

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