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Minn. Supreme Court Sides With Servers in Dine-and-Dash Lawsuit

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By Aditi Mukherji, JD on August 22, 2013 4:01 PM

In a major class action dine and dash lawsuit, the Minnesota Supreme Court ruled that servers cannot be required to cover losses from dine-and-dash customers without consent. Ruling in favor of the 750 server and bartender plaintiffs, the court remanded the case back to the district court to determine how much the employer, Uptown Drink, will have to fork over in damages.

Attorneys with clients in the food industry should pay heed to the opinion in Karl, et al. v. Uptown Drink, LLC, which fleshes out the contours of Minnesota's law on wage deductions to cover lost revenue.

Minnesota Labor Law

Under Minnesota law, employers may not deduct or withhold any part of an employee's wages for theft, loss or damage without the employee's voluntary consent after the loss has occurred. The rule applies to tips, too, since Minnesota law categorizes tips as wages.

Employers may seek an employee's consent to deduct wages after one of the following events has occurred: cash shortages, lost or stolen property, damage to property, any other claimed indebtedness running from employee to employer.

But does that include deducting dine-and-dash losses from servers' tips if they're making more than minimum wage?

Minimum Wage

Lower courts held Uptown Drink's dine-and-dash pay deductions were lawful because their employees' wages still exceeded the minimum wage.

But the Minnesota Supreme Court rejected that argument and ruled that nowhere in the plain language of the statute does it "require employees to show that deductions caused their wages to fall below the minimum wage."

Voluntary Consent

The court ruled that Uptown Drink violated the law because they did not get voluntary consent to deduct the wages after dine-and-dash incidents. Instead, employees were threatened with job loss and penalties unless they paid for register shortages, customers who walked out and unsigned credit card receipts, according to witness testimony.

The bottom line? Courts won't look too favorably upon consent that reeks of de facto coercion.

Minnesota employers should pay heed to the ruling. Those who violate the deductions law can be sued by employees for twice the amount of the deduction or credit taken.

Remember, whether it's about a broken plate or a customer's unpaid bill, an employer can't deduct or withhold any part of a employee's wages without voluntary consent. Advise your clients to take other dine-and-dash prevention precautions that comply with state labor laws.

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