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Wolfgang Puck Sued Over Alleged Tip-Skimming

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By Betty Wang, JD on May 24, 2013 10:30 AM

Celebrity chef Wolfgang Puck is being sued. A class action lawsuit has been filed in Manhattan Supreme Court against one of Puck's catering companies in New York. According to the suit, the company was allegedly adding a 22% service charge, but didn't share those charges with servers and bartenders. A plaintiff's representative told the New York Post that hundreds of thousands in unpaid gratuity are owed.

The Wolfgang Puck catering company contracts with other well-known companies like Live Nation, Google, and Rolling Stone magazine to provide their food and drink services at public and private functions.

What do state and federal laws have to say about this Puck company's alleged violation?

In this case, it may be a bit complicated.

In general, employers must comply with the federal Fair Labor Standards Act (FLSA), which also governs how wages and tips are to be handled. One of the most common violations of general employment law also include deducting too much of a worker's tips.

In this case, however, plaintiffs are alleging that they are owed "gratuities" from the 22% "service charge" that Wolfgang Puck's company was charging the venues for their services.

But a "service charge," according to the IRS, may not necessarily be considered a "tip." For example: Some restaurants require a 16% service charge for groups of six or more, while others suggest tip amounts calculated on the bottom of the receipt for 15%, 18%, and 20%. (Some do both.) The latter -- in which customers have a choice -- is considered a tip; the former -- in which customers don't have a choice -- is actually not a tip.

In short, businesses generally do not owe a cut of the "service charge" directly to their employees.

But if the employees can somehow prove that the service charge is actually a tip, according to the law, then they may be successful in their lawsuit.

Another possibility is that the alleged unpaid "gratuties" come from a number of sources, not just the company's "service charge." If that's the case, the plaintiffs in the Wolfgang Puck lawsuit may get their just desserts.

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