Waiter wars: Parc, Zahav restaurants tripped up by tips
Going out to dinner for the holidays? Or staying home and ordering from Grubhub? Nice for you, but a potential problem for food runners employed by PARC restaurant and other Stephen Starr venues.
The famous Moussa Dembele, a French soccer striker with dozens of goals to his credit, may soon leave the Celtic Football Club in Scotland. Rumors are swirling that there's a $53 million deal afoot.
Food runner Moussa Dembele, not well-known, boxed to-go orders of salmon tartare and lamb shank Provencal in the kitchen at Parc restaurant on Rittenhouse Square in Philadelphia, ready for delivery by Grubhub. He earned $4.50 an hour, plus tips pooled from the Paris-style bistro's servers.
Now Dembele, the food runner, is seeking class-action status for a lawsuit filed Dec. 4 against Starr Restaurants, saying Parc underpaid him and other food runners.
The suit comes as the U.S. Labor Department under the Trump administration is seeking comment on new regulations regarding tips, reversing a rule change made during the Obama administration, and putting tips back under the control of employers.
When it comes to restaurants, tips can be complicated. For businesses, there are many regulations. For workers, how tips are distributed, particularly those collected via credit card, can be a source of dissatisfaction on the job.
"When you are relying on an employer doling out from a tipped pool, there are always questions about how it's being doled out and whether it's being doled out fairly," said Nadia Hewka, an employment lawyer for Community Legal Services who routinely represents workers in restaurant wage-theft cases.
"We don't find the law hard to understand," responded Lois Najarian O'Neill, a spokeswoman for Parc restaurant, which vigorously disputed the suit's allegations. "We know how to pay our workers properly," including Dembele and Parc's other food runners, she said.
Dembele's suit makes the restaurant group founded by Philadelphia restaurateur Stephen Starr just the latest enterprise to get tangled in the tricky regulations around what's known as the tipped minimum wage.
In February 2014, Chickie's & Pete's owner Peter Ciarrocchi Jr. agreed to pay $6,842,412 plus a $50,000 penalty for improperly taking tips from 1,159 employees at nine of the company's locations. The U.S. Labor Department had accused the chain of requiring servers and bartenders to pay what was known as "Pete's tax" — 2 to 4 percent of their table sales in cash in a tip pool. Some money went to the people who clean tables and haul beer kegs, but the owner "illegally retained approximately 60 percent of the tip pool," the Labor Department said.
In October, the owners of the prestigious Israeli restaurant Zahav paid $230,000 to settle a class-action suit brought by a former server who said she was required to use her tips to pay $5 per shift per person to the restaurant's silverware polishers, people she said should have been paid by the company, not by her.
In November 2016, the owners of the Iron Hill Brewery restaurant chain paid about $1.3 million to settle a class-action suit after servers objected to paying a portion of their tips to expeditors, staffers who check orders for accuracy before they are delivered to the tables.
The federal Fair Labor Standards Act requires most workers to receive a minimum wage: $7.25 an hour nationally and in Pennsylvania, $8.44 in New Jersey.
However, workers who receive tips, such as servers and bartenders, can be paid at the tipped minimum — $2.13 nationally and in New Jersey, $2.83 in Pennsylvania.
Employers who pay the tipped minimum don't have to pay the full minimum wage. They can establish tipping pools, where bartenders and servers share their tips with fellow employees who directly help them serve customers, such as bussers, who clear tables; food runners, who deliver food to the serving staff; and barbacks, who keep the bar supplied with ice.
In many restaurants, these workers, like Dembele, earn somewhere between the tipped minimum and full minimum wage, with the difference made up from the tip pool.
If a restaurant is not paying the full minimum wage, additional rules apply and can lead to litigation if they are not followed, said Peter Winebrake, a partner in the Dresher law firm Winebrake & Santillo LLC, which specializes in wage and hour cases and filed the Dembele suit.
"Where we've had a lot of luck is in settling cases where tips were shared with expeditors," Winebrake said.
By law, tip pool money isn't for kitchen workers, who must earn at least the minimum wage. But certain jobs fall into a gray area, which varies by state. Winebrake's Iron Hill case involved expeditors. In other states, hostesses may fall into the gray area.
People who are paid the tipped minimum are supposed to serve customers primarily; but they can also be paid the lower rate for "side work," restaurant lingo for setting the table or preparing condiments.
More general work needs to be paid at the higher rate, but where the line is between "side work" and general work can be fuzzy. Were Dembele's duties boxing to-go orders part of serving diners, or were they general restaurant tasks? A judge will have to decide.
The latest wrinkle is a proposed change in regulations having to do with tips gathered by restaurants that pay all their employees, including servers and bartenders, at least the minimum wage and don't pay the lower tipped minimum.
Under the Obama administration, all those tips were given to the employee or placed in a tip pool for service workers. Under the proposed regulations, the tips will be controlled by the employer, who could choose to distribute tips to all workers, including kitchen help. The tips could also wind up being used "to make capital improvements" such as enlarging the dining room, or to "lower restaurant menu prices," the proposed regulations say.
Comment period for the regulation, which is backed by the National Restaurant Association and opposed by groups advocating for restaurant workers, closes Jan. 4.
"I see this as another assault on working people and working families," said Samuel Jones, who heads the Pennsylvania branch of the Restaurant Opportunities Center, an advocacy group for hospitality workers. But, Jones said, it's not likely to affect Pennsylvania and New Jersey restaurant tipped workers, since most of them are not paid minimum wage.
John Longstreet, president of the Pennsylvania Restaurant and Lodging Association, agrees.
Longstreet said it wouldn't make economic sense for restaurant owners, who now pay bartenders and servers $2.83 an hour to more than double their payroll costs just to get access to the tips. Plus, he said, servers and bartenders paid the minimum wage would likely end up earning less, which would make them unhappy.
In Pennsylvania, he said, "this regulation is much ado about nothing."