Batali Settlement (Shiftgig Q&A)

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Q:      I read that Mario Batali and Joe Bastianich settled a lawsuit for 5.25 million dollars with their employees. What happened and why was the settlement so much money?

A:

TV celebrity chefs Mario Batali and Joe Bastianich must have thought they walked out of the TV shows that they regularly appear on, and onto the set of Gordon Ramsay’s Kitchen Nightmares when they signed the settlement papers. Batali and Bastianich were the targets of a class-action suit brought by almost 1100 employees from seven New York area restaurants that they own.  According to the complaint filed in federal court in New York, Batali and Bastianich’s restaurants retained 4.5% of the tips from the server/bartender’s nightly wine sales.  The restaurant said it was using the money for training, research on wine, and replacing wine glasses.  Honestly, it didn’t matter the reason, the policy on its face likely violated the Fair Labor Standards Act.

Restaurants and bars are one of the trickiest industries for payment of wages because of the unique phenomenon of the tipped employee. The government allows for tipped employees to be paid less than the normal minimum wage.  If you’re a server or bartender, you probably notice that your hourly rate is lower than the $7.25 federal minimum wage (higher in some states).  That is called the “tip credit,” and employers get to reduce the minimum wage by over $5. However, the Fair Labor Standards Act makes clear that a tip is the sole property of the employee, and prohibits any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. The only recognized exceptions are tip pooling/sharing arrangements amongst tipped employees.

So what happened with Batali and Bastianich’s restaurants?  The alleged policy to keep 4.5% of the employees’ tips from nightly wine sales was illegal on its face, which put them in a very undesirable legal situation.  The penalties for taking the tip credit when deducting wages from over 1100 employees is what got the settlement amount up around the nightclub tab for a Miami Heat NBA Championship party. The lesson? Tips are employee property, and the wage and hour protections of the Fair Labor Standards Act have some bite to them.

Jonathan

Jonathan Boulahanis is an attorney in the Chicago office of Clark Hill PLC and is a leader of the firm’s Food and Beverage team.  Since Jonathan can’t cook like his Italian mother and the fast food was going to his hips, he became a self-proclaimed foodie. As an attorney, he has made a commitment to serve the food and beverage industry, no pun intended, by representing restaurants, bars, individuals, and other food and beverage businesses with various legal issues as they arise. You can reach him by sending an email to submissions@shiftgig.com.    

LEGAL DISCLAIMER:

The responses provided in this blog are for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Use of this blog does not create an attorney-client relationship between Jonathan Boulahanis or Clark Hill PLC and the user.