What Restaurant Workers Should Know About Overtime, Minimum Wage, and Tipping Pools

Restaurant pays $42,000 settlement after getting hit with class-action lawsuit for wage violations

Anyone who’s ever worked a restaurant probably knows that it’s generally legal to pay serving staff an hourly rate that’s lower than minimum wage. The rationale is that tips should make up the difference and then some.

But what happens if tips don’t cover the difference?

And since different rules may apply to wages for tipped staffers, that brings up the question of overtime. Should serving staff be eligible for time-and-a-half if they work more than 40 hours per week?

These are just a few of the questions that were raised by Rhonda Sanchez, a server at the El Vaquero restaurant chain in Ohio. 

Are Tipping Pools Legal?

Sanchez and the other servers were forced to pay 3% of their sale amount each night to the restaurant as part of a “tipping pool.” That money was then divided by the restaurant’s owners and managers.  If the servers were unable to meet that total from their tip money, they had to pay it out of their own pockets.

The servers were also not paid for the time they were required to work before and after their shifts began, while doing prep and side work. As a result, Sanchez often found that her hourly pay for actual hours worked came out to less than minimum wage.

In addition, Sanchez often worked more than 40 hours per week but didn’t receive overtime compensation. The company justified this by calculating overtime based on a two-week, 80-hour schedule.

Class Action Status to Fight Wage Violations

Sanchez and some of her colleagues spoke to a lawyer, who got the group permission to pursue a class-action lawsuit.

The lawsuit alleged three points:

The tipping pool was illegal. That is, tipping pools are generally only allowable under the law if they include only those staffers who work for tips. El Vaquero’s tipping pool paid out to managers and the restaurant’s owners, who were non-tipped employees.

The company failed to compensate workers at minimum-wage levels. The U.S. Fair Labor Standards Act (FLSA) calls for employers to make up the difference if tipped employees do not make minimum wage after tips are taken into consideration.

The company illegally denied overtime to tipped employees. The company’s method for calculating overtime based on a two-week, 80-hour model violated the FLSA regulation stating that overtime must tabulated based on a 40-hour work week.

Not surprisingly, the company agreed to settle the case rather than defend its actions in court.

It paid Sanchez and her coworkers a settlement of $42,000.

Contact the Murphy Law Group Now for a Free Consultation

If you’re a restaurant worker and you feel that you haven’t been compensated in accordance with the law, it’s a good idea to speak to an attorney.

Email us at murphy@phillyemploymentlawyer.com, or call (267) 273-1054 for a free consultation.