By:  Kara M. Maciel and Jordan Schwartz

On May 10, 2011, the Southern District of New York conditionally certified a collective action against eight New York metropolitan area restaurants owned by celebrity chef Mario Batali alleging violations of the Fair Labor Standards Act. In the action, restaurant servers argue that the Batali restaurants are paying employees less than minimum wage and unlawfully retaining a portion of their tips.

The primary allegation in the lawsuit is that the restaurants deduct from the employee tip pool a portion of all credit-card tips equal to approximately 4-5% of the nightly wine sales. One plaintiff, a former server at Otto Enoteca Pizzeria, alleges that several managers told him the deducted amount went to the “wine program,” while a general manager told him it went “back to the house.” 

The restaurant owners argued that class certification was improper because there was not sufficient evidence to prove a common policy of withholding tips. The court disagreed, however, finding that there was a reasonable inference “that there was a uniform policy across the eight restaurants.” Consequently, it granted the plaintiffs’ motion for conditional certification so that they can send out notice to other tipped workers at all eight restaurants. 

This lawsuit is just one of the increasing number of nationwide and New York-based class action lawsuits alleging unlawful conduct regarding tips, gratuities and service charges. Just one day prior to the Batali decision, a group of Yankee Stadium food service workers filed a putative class action alleging that the concession operators misappropriated their tips by keeping the service charge added to the cost of food and drinks served to field-level patrons, rather than giving that money to the workers. The suit alleges that, by accepting the service charge, the companies willfully violated New York labor law, which directs that gratuities be provided to the workers who provided the service.

This flood of activity is not surprising. Problems with mandatory service charges and their distribution among waitstaff have plagued the hospitality industry for years. To add to this confusion, as of January 1, 2011, thelaws in New York regarding tips, tip credits and tip pooling, among other things, have been amended. Until restaurants implement policies consistent with these new laws, the trend of increasing lawsuits will only continue. Hotel and restaurant employers in all states, including New York, should make compliance with state and federal wage hour laws regarding tips, gratuities and service charges a top priority.