Tip-Credit Class Action Lawsuit Could Be a Back-Breaker for the Industry.

By John Hendrie

We have a barn burner going right now, where Applebee’s Bartenders and Servers (some 5,500 employees) feel that they have been short changed on their hourly rate based upon work performed.

I am not a lawyer and do not play one on TV, but I have some common sense and approach many situations and issues by asking, “What would the reasonable man say or think?” This, of course, has nothing to do with some inane laws on the books; it is just an approach to the interpretation of those laws and application in the real world workplace. We have a barn burner going right now, where Applebee’s Bartenders and Servers (some 5,500 employees) feel that they have been short changed on their hourly rate based upon work performed.

The Law, as defined by the Fair Labor Standards Act (FLSA), is straight forward. Employees will earn the Federal minimum wage of $7.25 per hour, unless they are tipped employees (earn more than $30 per month in gratuities). In this case the employer can take a “tip credit” and pay those employees only $2.13 per hour.

To date most of the legal activity has been around Overtime application and questions of who should participate if there is a tip pool or shared tip arrangement within the enterprise. Now, we are moving into the arena (the gray domain) of what type of work is performed within that hour for which those tip eligible employees are paid. The Law, again, is straight forward. Non-tipped job related activities within a job description cannot exceed more than 20% in the workweek. And, the Feds give an example – “a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing”. Now, do not forget the 20% caveat. So, let’s get that stop watch out and invite the Time and Motion experts and auditors in.

Once again, not many of us are lawyers, and many of us have not managed a bar or a restaurant, but most of us at some point in time have worked a tipped position in Hospitality. We in service positions know when you are busy, you are flying, and, when you are not busy, you are cleaning, prepping or supplying, getting ready for the next rush. We also know that if we do not pay attention to this down time or break in the action with our preparation or replenishment activities, the next rush can be a killer – on us and our Guests. Our gratuity potential may land in that lurch. Management wants to stress productivity, keep payroll expenses to a minimum, and meet Guest Expectations. That’s the business!

Enter the reasonable man. He observes the dilemma. He knows that Management will always “push the envelope” to save money and willingly pay big bucks to those legions of lawyers to ease their pain, when challenged. On the employee side it appears to be more a question of fairness and protection under the law. The reasonable man also knows that to chart everyone’s activity throughout a week, create a standard for everyone’s specific service position and then measure and audit forever is really nuts, too. Insanity costs money and just wait until other service employees get wind of this case. Oh boy!

There is no doubt that some management somewhere has exploited the law and their workers. Is the Applebee’s case an exception or the norm? No matter, this is how it all starts, not quite Norma Rae, but a local shout, turning into a clamor. So, the sooner and faster a compromise or greater legal definition is arranged, the better we all will be served. We have the Guest Experience to deliver, lest we forget! Our Guest does not care how long it took to refill the salt shaker or to vacuum the rug or lug ice to the bar. But, they would almost unanimously back employee pay complaints. Time to settle this baby!