Outback Steakhouse Settles Claims for Unlawful Tip Pooling

Most of you probably know that employees are entitled be paid overtime for each hour worked over 40 in a given week assuming you are not exempt.  However, did you know that if you work in a restaurant or other service industry, and are paid tips which are part of your compensation, your employer is not allowed to require you to share your tips with other employees who have little or no customer contact such as managers or dishwashers?  This is called unlawful tip pooling and is generally a violation of Federal and state wage and overtime laws.

The Outback Steakhouse chain just learned about these laws the hard way.  A U.S. District Court in Minnesota approved a $1.25 million settlement between OSI Restaurant Partners LLC, parent of the Outback Steakhouse chain, and about 1,200 Outback Steakhouse servers in Minnesota, who alleged in a lawsuit that Outback unlawfully required them to share their tips with bussers and hosts.

The class-action lawsuit, which was filed in April 2010, alleged that the tip-sharing violated Minnesota Fair Labor Standards Act prohibitions on employer-run and mandated tip pools. The U.S. District Court approved the settlement Tuesday.

If you work in a restaurant or service industry and believe that your tips are being unlawfully taken from you,  speak with an employment law attorney who handles unpaid wage and overtime matters.  Feel free to consult with Scott Behren and the Behren Law Firm about these issues.

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  • G money

    Actually, employers are not allowed to require that an employee share his tips with anyone. Minnesota is simply one of the few states that have incorporated the requiremts of the FLSA properly into their state’s labor laws. Most states refuse to accept the idea that any required tip pool would be a violation of law. Most states suggest that tip pools can be required among any employees who have contact with the customer.

    The problem with these others state’s interpretation of the FLSA is, the FLSA has no authority to determine who is or isn’t legally entitled to a share of the customer’s private property, his tip. So while many states have incorporated into their labor laws an interpretation of the FLSA that suggests that employees who have contact with customers are entitled to a share of any tip given, the truth of the matter is, there interpretation lacks authority. Federal laws were written with the understanding that only the customer who gives a tip is authorized to determine who is legally entitled to his tip. States where required tip pooling is allowed, and not prohibited, are under the false assumption that our laws have authority to govern the tips customers present workers in the service industry.

    The Fair Labor Standards Act does not subscribe to the idea that someone other than the customer is authoriized to determine who his tip belongs to. Therefore, when it is suggested that an unlawful tip pool is dependent on who is being included, such is not supported by the FLSA. The determination of whether a tip pool is lawful is dependent on whether or not the employee who was given the tip is actually retaining his tips, meaning, using his tips as he he chooses free of any control of the empoyer. An employer required tip pool does not qualify as a legal tip pool, due to the fact the employee is obviously not using his tip as he chooses free of any control of the employer. Instead, his employer is requirng that his tips be used for the required tip pool.