Most wage and hour lawsuits in Texas focus on an employer’s alleged misclassification of an employee as exempt from overtime. However, a recent jury verdict from a federal court in Houston teaches that even in a highly unregulated wage and hour state like Texas, there are other wage and hour provisions employers must comply with and that can lead to expensive and protracted litigation.
The Lawsuit
On March 25, a federal jury in Houston, Texas awarded 55 employees $270,000 plus interest and attorneys fees. The employees in this collection action were current and former waiters and waitresses working for the Chili’s food chain who were required to contribute a percentage of their tips into the restaurant tip pool. That tip pool allocated one percent of the total pool to "food expediters." Food expediters are employees that set up trays of food and condiments that servers take out to customers. The expeditors could be paid a salary or paid a higher hourly wage than the Texas waiters who are paid $2.13 per hour. This dispute centered primarily around whether food expeditors were tipped employees under the Fair Labor Standards Act and whether the Chili’s tip pool requiring the tipping of expeditors was voluntary.
Tipped Employees and Tip Pooling Arrangements
Tipped employees are employees that customarily and regularly receive at least $30 a month in tips. Tip pools requiring tipped employees to contribute a portion of their wages to a tip pool that is shared with other normally-tipped employees (e.g., bartenders and bus boys) are legal as long as a tipped employee is not required to contribute more than 15 percent of his or her wages to the pool and the pool is not shared with non-tipped employees. Tip pooling with non-tipped employees must be completely voluntary and each tipped employee must determine for himself whether and how much to contribute to the pool. If the tip pool includes non-tipped employees and is not voluntary it is an unlawful deduction from wages.
The Verdict
In the lawsuit, the employees alleged that Chili’s mandatory tip pooling arrangement that included typically non-tipped employees (i.e., the expediters) was an illegal deduction from wages. A Houston jury agreed and awarded the servers the damages that resulted from these alleged illegal deductions. And while the employees will only obtain an average of approximately $4,900 each from a final judgment, the significant cost to the employer will be in the court awarded attorney’s fees that have not yet been determined and will likely be high six figures or more. According to Dave Faries at the Dallas Observer’s Food Blog (City of Ate), Chili’s parent company has announced that it will appeal the jury verdict.
Because the defendant in this case was a national restaurant chain I expect the verdict will prompt more lawsuits against restaurant chains challenging their tip pooling arrangements.