Tip-Pooling Dispute Advances on Red Robin

     (CN) – A Red Robin franchisee in Pennsylvania must face claims from servers made to tip out employees who rarely interact with customers, a federal judge ruled.
     Matthew Ford and Elisabeth Yuscavage, former servers at Red Robin restaurants in Wilkes-Barre and Dickson City, Pa., filed a federal class action against the chain’s owner-operator, Lehigh Valley Restaurant Group Inc.
     The pair says Lehigh’s 19 franchises in eastern Pennsylvania pay servers the minimum wage for tipped employees set by state law, $2.83 per hour, and has servers retain their tips to meet the federal minimum hourly wage of $7.25, thus giving the restaurant a “tip credit” of $4.42 per hour worked.
     A caveat to Lehigh’s mandatory “tip credit” policy, however, requires servers to give 3 percent of their gross sales to a “tip pool,” according to the complaint.
     Lehigh then allegedly distributed that pool to bartenders, expediters and busboys.
     The corporation defines expediters or “expos” as “the go-between for the guest and the kitchen … expected to fix any orders that do not adhere to the Red Robin standard or recipe.”
     Expos must “help prepare food when the kitchen is extremely busy, also check the flow of the tickets and make sure the orders match what’s on the plates,” according to the company website.
     Claiming that expos primarily work in the kitchen and rarely interact with customers, however, the servers say their inclusion in the tip pool violates the Fair Labor Standards Act (FLSA).
     The three-count complaint also alleges violations of Pennsylvania’s Minimum Wage Act and Wage Payment and Collection Law, which the parties agreed to litigate in state court.
     U.S. District Judge James Munley refused last week to dismiss the FLSA claim, noting that section 203(m) of the FLSA allows tip pooling among employees who “customarily and regularly” receive tips.
     “Taken as a whole, section 203(m)’s plain meaning beckons the image of customer service employees who receive tips directly from customers in a recurring fashion and as a matter of occupational custom,” Munley wrote. “Furthermore, the addition of the word ‘pooling,’ which means ‘to contribute’ or ‘make a common interest,’ signifies that all customer service employees with direct customer interaction would ‘contribute’ the tips they personally received into the ‘common interest’ or tip pool. As such, section 203(m)’s plain meaning requires that employees who ‘customarily and regularly receive tips’ have more than de minimis direct customer interaction.” (Italics in original).
     Lehigh failed to support its claim that expos qualify as regularly “tipped employees” through their proceeds from the tip pool.
     “We conclude that to properly take part in a tip pool a restaurant employee must have direct customer interaction,” Munley wrote.
     The ruling cites the allegation “that ‘[e]xpos spend almost all of their time working in or near the kitchen area and rarely interact with restaurant customers.'”
     “Viewing plaintiffs’ allegations as true, this allegation, read in conjunction with plaintiffs’ remaining factual averments, may establish a cause of action under the FLSA,” Munley wrote. “Ergo, the court will deny defendant’s motion to dismiss.”
     California employees filed a similar class action in Orange County, Calif., last year, alleging that Red Robin International stiffs employees for overtime and violates other labor laws.
     Red Robin reported first quarter revenues of $340.5 million earlier this year, having reaped $1.0 billion in annual revenue in 2013.

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