Sunday, February 23, 2014

Servers Fight Back Against Wage and Tip Theft

NEW YORK (Main Street) — Philadelphia is a legendary sports town with equally famous fans known for being loud, proud and rowdy. But one of Philly's most popular sports bars has committed a personal foul and is being fined half the distance to the goal. Chickie's & Pete's has been slapped with a multi-million judgment for requiring servers to contribute to a "tip pool" and violating federal minimum wage, overtime and record-keeping requirements.

The company and its owner, Peter Ciarrocchi, Jr., have agreed to pay more than $6.8 million in back wages and penalties to 1,159 employees at nine of the company's locations, plus a $50,000 civil money penalty. Chickie's and Pete's is also settling private lawsuits alleging unfair pay practices for nearly $1.7 million.

Known as "Pete's Tax," the tip-sharing arrangement required servers to contribute 2%-4% of their daily table sales to the pool. Payment was required to be given to the manager, in cash, at the end of each shift. Tips placed on credit cards were included, so many servers had to use their own cash, borrow it from another server or withdraw the cash from a nearby ATM to cover their contribution. The owner kept 60% of the total.

In addition, most servers and bartenders were paid a flat rate of $15 per shift – far short of the minimum tip wage of $2.13 per hour. Workers weren't paid overtime or for time spent in mandatory meetings and training – and were required to buy their own uniforms.

Under the Fair Labor Standards Act, tips are the property of the employee who receives them; however, an employer that claims a tip credit is required to pay a tipped employee only $2.13 an hour in direct wages, provided that amount plus tips received equals at least the federal minimum wage of $7.25 an hour. If they don't, the employer must make up the difference.

The federal minimum wage of $7.25 per hour was last increased in 2009 and the federal tip credit's cash wage requirement of $2.13 has not been increased since 1991.

"It's unconscionable that under federal law tipped workers have been frozen at $2.13 an hour for more than two decades," Secretary of Labor Thomas E. Perez said at a recent event in Columbus, Ohio. "The tipped workers I talk to tell me that some weeks, the amount in their paycheck after taxes are taken out is zero. So they're relying entirely on cash tips to survive. One out of every seven of them is on food stamps, and they live in poverty at three times the rate of the entire U.S. workforce. Is this any way to honor the dignity of work?"

Under the provisions of the consent judgment filed in U.S. District Court for the Eastern District of Pennsylvania, and subject to court approval, the company will pay minimum wage and overtime back wages and is required to return the improperly retained tips to the servers, as well as pay liquidated damages.

"When employers exploit tipped workers, they not only harm their employees who are working hard to earn a living, but also take advantage of the trust of their customers," said Laura Fortman, principal deputy administrator for the department's Wage and Hour Division. "Customers might not realize it, but their tips frequently are paying part of their servers' wages, not just giving them a little extra to go with their pay. Chickie's and Pete's behavior is troubling because they both unlawfully took tips from their workers and failed to pay them even the $2.13 per hour the law requires when an employer takes a tip credit."

—Written by Hal M. Bundrick for MainStreet


Wednesday, November 6, 2013

Pay the Workers! Moving in the Right Direction but not there Yet!


Florida's current $7.79 hourly minimum wage rate will increase to $7.93 effective January 1, 2014.  Florida's minimum wage law requires the Florida Department of Economic Opportunity to recalculate Florida's minimum wage annually based upon the increase in the federal Consumer Price Index for Urban Earners and Clerical Workers in the Southern Region. This minimum wage increase applies to all employees who are covered by the federal Fair Labor Standards Act.

This hourly increase also impacts wages paid to tipped employees working in Florida. For tipped employees who receive tips as part of their compensation under the FLSA's tip credit rules, employers may count those tips as wages under Florida's minimum wage law. Employers may take a credit of up to $3.02 per hour for all tipped employees.  However, tipped employees must also receive a direct hourly wage. Effective January 1, 2014, this direct hourly wage must be at least $4.91 – calculated as Florida's minimum wage ($7.93) minus the permissible tip credit ($3.02).

Saturday, September 7, 2013

Tips, Automatic Gratuities, Service Charges - And Now The IRS?

An updated tax rule is causing restaurants to rethink the practice of adding automatic tips to the tabs of large parties.
Starting in January, the Internal Revenue Service will begin classifying those automatic gratuities as service charges—which it treats as regular wages, subject to payroll tax withholding—instead of tips, which restaurants leave up to the employees to report as income.
The change would mean more paperwork and added costs for the restaurants—and a potential financial hit for waiters and waitresses who live on their tips but don't always report them fully.
Darden Restaurants Inc., owner of Olive Garden, LongHorn Steakhouse and Red Lobster, has long included automatic 18% tips on the bill for parties of eight or more at its more than 2,100 restaurants, but is experimenting with eliminating them because of the IRS ruling, said a spokesman.
The chain in July stopped automatic tips at 100 restaurants in four cities, where it is testing a new system in which the restaurants include three suggested tip amounts, calculating for the customer the total with a 15%, 18% or 20% tip on all bills, regardless of party size. Diners can opt to tip more or less than the suggested amounts, or to not tip. Depending on how patrons react and how well the new software system works, Darden may switch to such suggested tips at all of its restaurants. A spokesman said the company will decide by year-end.
Texas Roadhouse Inc., which includes a tip of 15% for parties of eight or more at many of its more than 390 restaurants, is planning to phase out automatic gratuities by the end of the year, a spokesman said.
"I think the vast majority of restaurant owners will discontinue the practice," says Denise Wheeler, an employment attorney in Fort Myers, Fla., who represents several restaurant chains.
The change will complicate payroll accounting for restaurants that stick with automatic tips, because they will need to factor those tips into pay, meaning hourly pay rates—could vary day to day depending on how many large parties are served.
Restaurants are required to report to the IRS what its employees report receiving for tips and to pay Medicare and Social Security taxes on those amounts. Restaurants are eligible for an income-tax credit for some or all of those payments, but service charges aren't eligible, according to Marianna Dyson, a payroll tax attorney in Washington, D.C., who represents restaurant chains.
The change comes amid increasing costs and record-keeping requirements for restaurants. In January, restaurants with 50 or more full-time workers will be required to offer health coverage to employees working 30 or more hours a week, though penalties don't begin until 2015.
Restaurants adopted automatic gratuities to help ensure that their servers—whose tips supplement a salary that is often less than the federal minimum wage of $7.25 an hour—weren't stiffed on large tabs. But many servers are likely to support dropping the practice because they don't like the idea of their tips being treated as wages, which requires upfront withholding of federal taxes, and means they won't see that tip money until payday.
"I don't want my tips to be on my paycheck as a wage. I like to get my tips at the end of my shift because I know what I'm getting right away," says Tamie Cordoba, a 54-year-old server at a LongHorn Steakhouse in Jacksonville, Fla.
Ms. Cordoba makes base wages of $4.25 an hour, or $144.50 to $161.50 for her average workweek of 34 to 38 hours. She said she usually makes an additional $500 to $650 a week in tips. Since she never knows exactly how much she will get each week in tips, getting paid at the end of each shift helps her budget, Ms. Cordoba said. "In this industry, that's what we live on. If I had to wait two weeks I don't know how I'd survive."
The Cheesecake Factory Inc. suggests an 18% gratuity for parties of six or more, says a spokeswoman, but "We advise our guests that leaving a gratuity is always discretionary." She said the company is now reviewing its policy.
The IRS ruling was issued in 2012 to clarify and update earlier tax guidance on tips, which didn't spell out how automatic tips were to be treated. Restaurants persuaded the agency to delay implementation until next year.
In a statement, the IRS said it noticed an increase in the use of "auto-gratuities" and that it believed "additional clarification in this area would be in the best interest of tax administration."
The updated rule says the automatic tips are service charges because they aren't voluntary. In a question-and-answer section of the ruling, the IRS provided an example of a restaurant suggesting different tip amounts, and said that practice isn't subject to federal withholdings because the customer is still free to choose whether and how much to tip.
Still, the ruling has caused some confusion. Some restaurants insert an amount on the tip line and then remind guests on the check that they are free to adjust that amount up or down. Ms. Dyson, the payroll tax attorney, said that practice could come under scrutiny from the IRS. "How far can you go before the IRS says that looks like a service charge?" Ms. Dyson says.


Wednesday, August 14, 2013

Pooling Tips & The 18% Service Charge - Don't Believe the Hype

After eating pastured-pork sausages and drinking a few pints of San Diego-brewed beer, it barely registered that I wasn’t able to add a tip to my bill at The Linkery. In lieu of gratuities, the San Diego restaurant, which recently closed, added an 18 percent surcharge to every bill. That’s less than the 20 percent I make a habit of leaving as a tip, so I didn’t think too much of it when I ate there last year.

The policy, which The Linkery adopted in 2006, was apparently so wrapped up in the identity of the restaurant for some customers that discussing the reasoning of not accepting tips became a distraction from its farm-to-table ethos, according to former owner Jay Porter. Now, in the wake of the restaurant’s closing, Porter is writing a series of blog posts that show just how involved his thinking about tips and wages and the restaurant business was. “I felt like I was sitting on this years and years of knowledge and experience and observations that basically nobody but us have, because we’re the only place that has done this and we’re the only place that has done this for many years,” Porter said, somewhat grandiosely, in a recent telephone interview. “So, it seemed like something interesting to write about.”

Indeed, it is. Porter’s posts offers compelling, pro-business yet community-minded reasons for doing away with tips—something that he argues raises overall wages, results in better service, helps curb the sexualized emotional labor of female employees and the discrimination of minority workers, and reduces turnover.

“Unlike all other working Americans, restaurant servers are a class of simpletons who require a drip of money every few minutes to keep them on task,” Porter writes of the general attitude customers have about service workers and the culture of tipping. “By perpetuating the idea that servers, and servers alone, won’t perform without the threat of pay withheld, we dehumanize our neighbors and peers who work taking care of us.”

So is not tipping—or, more accurately, doing away with tips—the key to a more equitable industry? It’s not quite that simple, as labor laws, restaurant culture and, alas, the market, are all somewhat in the way.

“There are things that owners can do, things that operators can do to help relieve the inequalities in the system, but in the end, McDonald’s is really busy,” Porter said. “It’s a pretty niche market when you want to make the argument to your community that you should make everything by hand and pay people livable wages. That’s also the argument that I would like to make.”

Here’s what Porter’s version of that argument looks like: An 18 percent line-item charge is added to every check, and no additional gratuities are accepted. There’s no pooling tips, no tipping out, no change made to the service charge in relation to the diner’s opinion of the service. The set model, according to Porter, accomplishes a number of things. For one, it removes the incentive for servers to play the system for tips—which, if one person is vying for too many tables, reduces the quality of service, to the detriment of the business. It also puts front of house and back of house on more equal footing. “By implementing the system, we improved the service so revenue in general went up, which meant that the pie got bigger,” he says.

At the restaurant’s peak—Porter says that overall revenue dropped after the recession, bringing employees total pay down along with it—the approach amounted to servers earning $22 per hour, cooks pulling in $12 to $14, and dishwashers making about $10. That’s not going to buy anyone a house, but it’s not the “poverty wage” (a term I’ve never heard a restaurant owner use to describe his own industry’s pay standards) that he outlines as the status quo in one blog post:

We can extrapolate from standard industry models that, of the $1000 in sales, there will be $300 available to cover the 36 hours of labor. It just so happens that this math means that everyone in the house will make $8/hour, which is of course both minimum wage and a poverty wage. But that’s just how the pie divides.

ROC United, an advocacy group for restaurant workers, agrees with Porter about where minimum wage leaves employees: “The current full minimum wage of $7.25 still produces a poverty-workforce,” says founder Saru Jayaraman. And, in states like New York, that wage is $2.13 per hour for tipper workers. “Although tipping is most likely not going anywhere anytime soon,” she says “there are several restaurants across the country that institute alternative approaches to wages—either by doing away with tipping altogether or starting their tipped employees at higher rates than the subminimum—all of which help combat the industry narrative that low wages are fundamental to running a successful restaurant.” 

There is another product of that industry narrative minimum wage—tipped or un-tipped—doesn’t account for, and that’s emotional labor: the sexualized exchanges that occur, for the most part, between male clientele and female servers. For women in the industry and those who go out, the tip-less model upends the power structure.

“A certain small number of very vocal men (and it was always men) resented that we were not letting them try to exercise additional control over our team members,” Porter writes. “The idea that the restaurant was not offering our servers up as objects of control was heresy. For these people, the primary service they wanted from the restaurant was the opportunity to pay for favors from the server.” Considering that women make up 73 percent of the tipped workforce, this is by no means a small issue in the conversation about wages and tips.

Rather than having to put up with unwanted advances from customers—or having to engage in tip-increasing emotional labor tricks, like touching diners or other ways of intimating intimacy—female servers at The Linkery had more autonomy. “In the non-tipped environment, it was really easy for us to tell our team, ‘Hey, if a guy gets out of line, get ride of him. Get out of here. We don’t want him,’ he says. “But in a tipped restaurant where that guy who’s out of line represents a significant portion of a server’s income, that was a much harder thing to communicate.”

Research, however, shows that the psychology of tipping is more complicated than a simple power play or a cash-for-flirting exchange. In a post about Porter’s writing, Popular Science’s Shaunacy Ferro points to studies that suggest very different driving forces:

A 2010 paper Azar published in Applied Economics found that rather than being a strategic move to ensure quality service, tipping is largely the result of psychological motivations—like feeling social pressure, or wanting to preserve a self-image of generosity. Another study found that tipping is a risk sharing method between a waiter and a customer, ensuring people don't lose too much money on food that could be terrible: "when the meal is unusually bad the diner can choose to withhold a tip and reduce the loss of utility that would otherwise occur," the researcher theorized.

There’s no true consensus, though, and Porter’s observations are supported by another paper Ferro cites from the International Journal of Hospitality Management: “As a result of management’s limited ability to directly control the behaviors of servers at the point of service delivery they attempt to do so indirectly by delegating control responsibilities to consumers who leave tips in accordance with the quality of service they received,” writes the author, sociologist Zachary Brewester. 
In our interview, Porter gave his less academic, more expansive take on what that delegation (or, perhaps, abdication) of control can lead to. “So tipping is a way in which it allows all these nasty things to happen that we’ve outlawed in every other industry but restaurants. So, we’re just sweeping that all under the rug because we don’t want to give up our racism or we don’t want to give up our sexual power games. But we just have this tipping thing that kind of hides it all.” 

Wednesday, July 31, 2013

Sick Workers Cause 20 Percent of All Foodborne Illnesses - Disney and Darden Don't Really Care

Sick Workers Cause 20 Percent of All Foodborne Illnesses
If you're not feeling so hot after eating at your local restaurant, it might not be the food that originates the problem. According to the Centers for Disease Control, about one-fifth of all foodborne illnesses can be linked to a sick food worker who handled the food. Why doesn't that person stay at home instead of spreading his or her germs on your meal, you ask? Likely because that worker doesn't have paid sick days.

If you're not feeling so hot after eating at your local restaurant, it might not be the food that originates the problem. According to the Centers for Disease Control, about one-fifth of all foodborne illnesses can be linked to a sick food worker who handled the food. Why doesn't that person stay at home instead of spreading his or her germs on your meal, you ask? Likely because that worker doesn't have paid sick days.

NPR reports that the Food Chain Workers Alliance claims that "more than half of all food workers come to work sick because they can't afford to take a day off." Many kitchen staff get paid below minimum wage and have no health benefits or paid sick days. According to NPR, "Only 21 percent of the workers surveyed said they could take a paid sick day."

Of the 47.8 million cases of foodborne illnesses, over 9 million can be traced back to unhealthy workers. in recent years, Hepatitis A outbreaks have occurred in fast casual dining establishments in states across the country. Reports from Subway, Taco Bell, Friendly's, McDonald's, Olive Garden, and Chipotle have all made the list.

The Law Office of Lowell J. Kuvin is hoping that foodservice operators and retailers offer higher pay and sick days to incentivize workers to stay home. However, according to NPR, the National Restaurant Association is opposed. They believe the system that's in place should make it easy for workers to change their schedules. Scott DeFife, executive vice president for Policy & Government Affairs at the National Restaurant Association, said, "Restaurants typically offer flexible work schedules and hours that best meet the needs of their workplace and their employees, with the ability to switch or pick up shifts."

Walt Disney World and Darden Restaurants (which owns restaurant chains like Olive Garden and Red Lobster) both have happy-looking public faces regarding the health of the people they employ. But behind the scenes, they’re doing everything they can to deny people working in Florida the right to earn basic benefits like paid sick days on the job.

This all started in mid-2012, when lobbyists for Disney and Darden colluded with county commissioners in Orange County, FL (a text message plot now known as “Textgate“) to keep a paid sick days measure off the ballot. A Florida judge ruled the county commissioners acted illegally, and ordered the measure back on the ballot.

But wouldn’t you know it? The 2012 ballots had already been printed. That bought Disney and Darden some time – which is exactly what they wanted. Over the next few months, Disney and Darden lobbyists worked with Republican legislators in Florida to draft a law to prohibit local governments from enacting paid sick days legislation. That bill has now passed the Florida Senate and is headed to the House for final approval.(Update: The Bill did not pass, but "there is always next year" a reporter heard Mickey Mouse say).

Here’s the rub: Last year, Darden Restaurants paid its CEO $8,100,000, while the average employee in one of their restaurants earned just $25,463. That’s nearly $3,900/hour for the CEO while most of their employees scrape by on just over $12/hour – without basic protections like paid sick days or health care benefits. The CEO-to-worker pay ratio is even worse at Walt Disney Co., where CEO Rober Iger pulled down more than $19,000/hour last year, while his employees averaged $31.

Something to consider the next time you go out to eat or plan a family vacation.

Friday, June 14, 2013

Shuckers Waterfront Grill Deck Collapse - Dozens Of Customers Injured

As fans packed Shuckers Waterfront Grill to cheer on the Miami Heat against the San Antonio Spurs Thursday night, the waterfront patio deck gave way, crashing into Biscayne Bay, spilling dozens of terrified patrons into the water.

The accident happened at the popular North Bay Village spot, in back of the Best Western Plus on the Bay Inn & Marina, 1819 79th Street Causeway.

Dozens of police and fire-rescue units from around Miami-Dade rushed to the scene after the sudden collapse, which happened about 9:45 p.m., minutes before the game’s halftime, as the Heat was pulling away from the Spurs.

As many as two dozen people were injured. By 11:20 p.m., 15 people had been transported to various hospitals, two of them in serious condition, said Miami-Dade Fire Rescue Capt. Eugene Germain Jr. Another fire captain said one person might be missing and that a search was underway as rain fell.
Germain said approximately 100 people were on the deck when it fell into the water. The deck’s official capacity was not immediately known.

“There was just a crack, and then we were in the water,” said Crystal Infante, 23, who was eating and watching the game with friend Hernan Reyes, 21, when the deck, about five feet over the water, collapsed. “It was really hard to get out, and you couldn’t find anyone.”

Infante said the water was shallow enough for them to stand, but it was difficult for them to get out because wood, umbrellas, tables, chairs and other debris surrounded them.

Multiple air rescue units also were called to the scene. 79th Street was shut down.

Pictures from the scene showed rescue workers pulling green plastic deck chairs and piles of debris from the water.

Leah Masters, a hostess at Shuckers, told Miami Herald news partner CBS4 News that people had just gotten to their feet to cheer a Heat basket when the deck collapsed.

As helicopters circled over the scene, rescuers carried people away on stretchers, one after another.
Chris Volz, 39, said he was sitting at the western end of the bar, about 10 feet from where the deck gave way.

“Everybody’s watching the game. It sounded like a freight train, then everyone was gone. The deck went down like a V.” He said it happened in a split second and that no one had a chance to get away.

Bartenders were diving into the water to help rescue patrons. Fire trucks pulled to the water’s edge and extended their ladders to help patrons climb to safety.

Shuckers lost power when the collapse happened, casting victims and rescuers alike into the dark.
Ernesto Reyes, a regular at the eatery on Miami Heat game days, had pulled up to the “last open parking spot” at the restaurant when he heard a loud cheer, then a roaring sound followed by screams as the deck patio collapsed in up to six feet of dark water.

“I ran inside and saw people in the water everywhere. I started pulling out chairs and tables and helping them get out; many were in shock. They were just standing in place as if they couldn’t believe what had just happened to them.”

Others were in a panic, he said. “It was a very chaotic scene.”

He helped a young mother with a large gash on her head and a baby in her arms, a young woman who lost her lower teeth and a young man trapped by heavy tables.

Reyes, 36, a paralegal who lives nearby, thanked his boss for keeping him late at work at the Law Office.

“I would have been on that deck. This is my favorite place to watch the Heat; there is always a big crowd here.” Reyes thinks the collapse occurred just before the halftime of the Heat game, the team was pulling away from the Spurs by 10 points.

Mayra Samubio, 40, of Orlando, who had gone to dine at the restaurant on the first day of her vacation in North Bay Village, was just about to enter the balcony when it collapsed. “I saw a lot of people crying and very scared. Good thing there weren’t that many children on the deck,” she said.

Miami Beach resident Peter Zalewski was also on the restaurant side, watching the game.
"There's like a rumbling and then a short time later, everybody just disappeared," he said. "All the tables just sort of disappeared and then suddenly this whole burst of dust came inside the restaurant."
He said many people initially panicked, running toward the exit because they didn't know what was going on. "Nobody could really figure out what was happening. We didn't know if it was a bomb; we didn't know what it was because of the loud noise."

Tables with umbrellas turned dangerous as people who fell were covered in the umbrellas and hitting their heads on wood. Many people who he saw had scrapes, bruises and lacerations on their heads.
"Most of the people were just calling out, 'Is anybody missing, is anybody missing?' You just kept hearing that over and over and over." He said there was chaos for about 10 minutes before the first police officers arrived, followed eventually by fire-rescue workers.

"It's a little startling because you're sitting there watching the game, you're complaining about Wade not making his baskets and Bosh not getting any rebounds and next thing you know, there's this huge noise, the landscape just disappears, people disappear and the ones still standing start running toward you. It was definitely a moment of chaos.”

Patrons banded together to help those who fell in the dark water, despite fears that the rest of the structure might not be sound. He said some patrons who got out of the water quickly, jumped back in to move tables, chairs, umbrellas and other items so those trapped could escape. "Nothing was organized, no one knew anybody from anyone," said Zalewski, who joined in to help pull people up. "But everyone was sort of thrown in and lended a hand somehow."

By 11 p.m., a triage unit had been set up in the parking lot, and victims began to be transported to area hospitals.

Thursday, June 13, 2013

Judge Rules "Interns" Are Not Always "Interns" And They Must Be Paid

A New York judge's ruling that Fox Searchlight interns are entitled to be paid for their work should "serve as a warning" to employers seeking free labor under the umbrella of unpaid internships, one of the plaintiffs who worked as on the film "Black Swan" said on Wednesday.

 "This decision should serve as a warning to employers across the country," Eric Glatt said in a statement issued by Outten & Golden LLP, the law firm representing the plaintiffs. "You cannot simply slap the term 'intern' on a job description and think that relieves you of the legal and ethical obligation to pay wages for the labor that helps your organization succeed."

 On Tuesday, U.S. District Court Judge William H. Pauley III found that Glatt and fellow "Black Swan" intern Alexander Footman were entitled to pay for their work on the film under the Fair Labor Standards Act and New York labor law.

Pauley also determined that Eden Antalik, who worked as an unpaid intern at Fox Searchlight's corporate offices in New York, can pursue class-action claims against the company. In his ruling, Pauley determined that the interns "performed tasks that would have required paid employees …

Menial as it was, their work was essential. The fact they were beginners is irrelevant … [T]he FLSA does not allow employees to waive their entitlement to wages." Fox Searchlight said Thursday that it's "very disappointed" in the judge's decision. "We believe they are erroneous, and will seek to have them reversed by the 2nd Circuit as quickly as possible," the company said in a statement Rachel M. Bein, one of the attorneys representing the interns, said that Pauley's order emphasizes that unpaid internships are only valid if they are "part of a real training program."

"This important ruling re-affirms that unpaid internships are not lawful unless they are part of a real training program that involves much more than just learning on the job, and they are not lawful if the interns' work provides a direct benefit to the company. It also emphasizes the importance of allowing interns to band together in class actions and challenge companies' illegal unpaid internship policies." 

The lawsuit was filed in 2011.