Tuesday, April 26, 2022

Restaurant learns the hard way what an illegal tip pool looks like

Hard Eight BBQ says it misunderstood its obligations under the Fair Labor Standards Act by paying managers a share of tips earned by servers across the restaurant's five locations. As a result, following a Department of Labor investigation it reached a settlement with its managers totaling $867,572. 

Matt Perry, COO of Hard Eight BBQ, told 5 NBCDFW that "managers were part of the tip pool at their five restaurants because they do the same jobs as other hourly employees on any given shift and that because of that they felt like managers should also receive a small portion of the tip share."

According to the DOL's Wage and Hour Division, which announced the settlement last week, "As businesses struggle to find people to do the work needed to keep operating, employers would be wise to avoid violations or risk finding it even more difficult to retain and recruit workers who can choose to seek jobs where they will receive all of their rightful wages."

In addition to being a smart hiring and retention practice, however, it's also the law. As I've previously shared, it's illegal under the FLSA for managers and supervisors to participate in a tip pool or otherwise keep any portion of tips earned by other employees. (It's not illegal for managers and supervisors to keep tips they receive from customers for services they directly and solely provide.)

So here's my tip for every business in the hospitality industry — restaurants, bars, tap rooms, and everyone else. Get yourself an employment lawyer and have him or her audit your wage and hour practices before the DOL or a group of your employees does. It's always easier, less painful, and less costly to fix mistakes you find yourself than to fix them after you're called out on them.