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Batali's Restaurants Sued Over Waiters' Tips

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By Robin Enos on May 16, 2011 6:42 AM

Restaurant owners, if you thought you would avoid employee wage claims if you duplicated Iron Chef America champ Mario Batali's tip pool, think again.

Batali's restaurants distribute the server tip pool on a percentage plan. Wait captains get the most, bartenders get a percent, and backwaiters get the least.

But last July, Batali's server staff sued, claiming not that the tip pool distributed unfairly, but that a 4-4.5% house retainage from the wine sales portion of the pool to cover wine education violated the federal Fair Labor Standards Act.

With the Batali employees' lawsuit, does the house taking 4% to 4.5% of the wine sales portion of the tip pool create problems under the federal Fair Labor Standards Act?

Restaurant owners (big and small) may be able to pay employees less than the minimum wage if they earn tips. However, employees must be paid a wage plus tips which adds up to at least the minimum wage, per hour worked.

Since 2009 the federal government has required employees receive a wage equal to $7.25 per hour. The New York State minimum wage is exactly the same--$7.25 per hour. New York has a special rule for hospitality industry workers, including restaurant workers.

That minimum wage can come from a piece rate or tips, but must pencil out to at least $7.25 per hour. Tip pools get figured in, but have no inherent illegality.

And as for overtime, federal law requires it be compensated at one and a half times the hourly rate, for hours worked over 40 hours in a week.

If tip pools raise no legal red flags, the issue will come down to whether Mario Batali's wait staff each gets at least $7.25 per hour, or at least $10.88 per hour for OT over 40 hours per week. Federal law doesn't seem to care how the tip pool gets carved up, if employees receive those basic levels of compensation.

So the Batali lawsuit will probably come down to a spreadsheeet accounting for each employee. Without more ingredients, this particular recipe seems to favor Iron Chef America champ Mario Batali. But restaurant owners should be thinking about doing some of their own figuring here.

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