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How To Avoid Tip-Related Lawsuits

How To Avoid Tip-Related Lawsuits

Do you agree with the idiom “better the devil you know than the devil you don’t?” Then click on to find out the latest news on the labor front, courtesy of Berke-Weiss & Pechman LLP, one of the New York law firms that’s been wreaking financial havoc on the city’s restaurants. It’s full of scary stuff about tipping and wage issues—but it might be a useful resource, too.

Berke-Weiss & Pechman is just one of the law firms that has figured out how to wring huge settlements out of prominent New York City restaurants by filing wage-related class action suits. Attorney Louis Pechman got the ball rolling in 2009 when he scored a $3.2 million settlement on behalf of the employees of Sparks Steak House. That suit alleged that waiter tips at Sparks were spread around to managers and other employees who should not be tipped.

Many other restaurants have fallen victim to related lawsuits since. Nobu, Jean Georges, Bobby Flay’s Mesa Grill, 21, Balthazar and other blue-chip names have all taken big hits. Restaurants settle these suits because going to trial risks an even-more expensive verdict. “These restaurant cases are easy money,” Pechman tells Crain’s New York Business. “If there is a violation, it's simple to prove.”

He speculates that because many of the deep-pocketed restaurant operators in New York City have already been sued, lawyers will soon be going after smaller fry. “I’d suspect that the big-name places have run their course, but you are always going to have issues with smaller restaurants cheating,” Pechman says.

If you’re one of those smaller fry, it may be worth your while to look at the voluminous wage and hour information Pechman’s firm offers on its website. It’s New York City-specific, to be sure. But these same issues repeat themselves in jurisdictions nationally. If you want to avoid trouble on this front—and we know from the size of the financial wounds inflicted on top New York City restaurants that you do—it will pay you or your attorney to check this site every month or so.

Just the sheer volume of legal actions underway at any one time will give you pause. Three stories posted late in September give you a flavor for what sort of cases are being litigated now:

• Chili’s Restaurant Servers Win Case Holding Expediters Should Not Be In Tip Pool

• Boston Market Assistant Managers’ Lawsuit For Overtime Pay Moves Forward

• Applebee’s Restaurant Settles Sexual Harassment And Retaliation Lawsuit for $1 Million.

There are many more like these, and this site is doing operators a big favor by making all this information available in one place.

Plaintiff attorneys in class action lawsuits take one-third of any settlement as their fee, so they will continue to bring these suits. Big chains like Chili’s, Boston Market and Applebee’s hate to pay out these settlements, but at least they have the financial resources to do so and still stay in business. For the average restaurant, though, the dollar amounts involved in some of these settlements could spell doom.

That’s why you want to stay abreast of what’s going on by checking out every now and then. Doing so will encourage you to become familiar with the applicable wage and hour rates for your locale and to keep meticulous records of how your restaurant’s tip pool gets divvied up. When Pechman says it’s easy to prove violations and win a judgment, these are the two areas where he knows operators slip up. Staying on top of them can help save you a bundle.