Darden Faces Wage and Hour Class Action Alleging Side work Abuse

October 3, 2012

The Lawsuit:

On September 6, 2012, two former employees brought an action in the Southern District of Florida bringing individual and collective actions against Darden Restaurants, owner of Olive Garden, Long Horn Steakhouse, Red Lobster and The Capital Grille, for alleged FLSA violations. The primary issue concerns side work, which plaintiffs claim is excessive at Darden, requiring servers to perform non-server work while getting paid “server minimum wage.” Plaintiffs also allege that Darden would require them to arrive for work at the beginning of scheduled shifts but not to punch in until customers arrived, all the while expecting servers to work to prepare the restaurant for the coming business. Plaintiffs also alleged a history of misconduct on the part of Darden by referring to prior lawsuits against Darden in other parts of the country concerning allegedly similar claims of wage violations. They even referred to a website describing the alleged history Darden which may be found at www.dignityatdarden.org.

On top of this, the Department of Labor has found violations similar to those claimed in the lawsuit in several individual investigations, including a 2011 probe in which the company agreed to pay more than $25,000 in back wages to Olive Garden workers in Mesquite, Texas. Darden was also assessed a $30,800 fine in that case. Also in 2011, Darden paid more than $27,000 in back pay and a nearly $24,000 civil penalty for ­labor violations involving 109 current and former Red Lobster workers in Lubbock, Texas, according to the Labor Department. There are similar lawsuits pending in Illinois and New York, but the one filed in Florida is the first seeking to represent all Darden workers at its four major brands.

Of course, if what the plaintiffs allege proves to be true, they will likely win a substantial judgment in the event they proceed to trial. Facts can be difficult things for both sides, however, but the law should be more clearly perceived.

The Law / Side Work:

The issue with side work really is not the work itself but how much a company must pay its servers for doing it. Both federal and state statutes require employers generally to pay “minimum wage” to their employees. As for restaurants, the law allows employers to take a “tip credit,” which means that employers can pay servers less than the minimum wage, but no lower than $2.13/hour, if servers collect tips amounting to a sum equal to or exceeding minimum wage for the server by the end of each week. The law allows this because the server makes tips due to the customer service nature of his or her work and the policy behind the law strikes a balance to allow employers to credit those tips toward its minimum wage obligation.

But this balance only makes sense if the server is indeed performing “service work.” Obviously, a company would not be permitted to hire someone as a “server,” pay him or her $2.13/hour and then assign the employee non-service work such as cleaning bathrooms or extensive food preparation, as the employee would not only be making less per hour but also be deprived the opportunity to earn tips while working in the back performing non-service tasks.

So there is service work and non-service work, and then there is the gray area of “side work.” The law allows restaurants to assign servers “side work” that is not directly “service work” but is “incidental” to the tip producing service work while still paying the servers the lower, tip-credited, hourly wage. Battle lines form along the definition of what work can be fairly treated as “service related” under the state and federal wage laws.

To make matters more complicated, each state is different while the federal FLSA stakes its own position on the issue. Under Federal law, employees working in a “tipped occupation” are required to receive at least that minimum wage; however, their employers are permitted to pay a direct wage of $2.13 per hour, 29 U.S.C. § 203(m), and then take a “tip credit” to meet the $7.25 per hour minimum wage requirement. The side work duties that will be considered incidental to tip producing activities depend on the type of service occupation of the employee. There is no set list of duties that are considered incidental to each job in a restaurant, but the Department of Labor’s Field Operations Handbook advises that making coffee, cleaning and setting tables, rolling silverware, cleaning work stations and occasionally washing dishes or glasses will usually be considered incidental to the job of a waiter or waitress. In comparison, cleaning a restaurant’s bathrooms will generally be considered not incidental to a waiter or waitress job, meaning that the employer cannot take a tip credit for that time.

In addition, according to the Department of Labor’s Field Operations Handbook, an employee may be considered a tipped employee so long as under 20% of an employee’s time is spent doing side work. If an employee spends over 20% of their time doing side work, no tip credit may be taken for those duties. A tip credit may still be taken, however, on the time that the employee does spend engaged in tip producing activities. Taking a tip credit for side work that is not incidental to tip producing activities is a violation of the Fair Labor Standards Act for paying an employee less than the minimum wage. Employers who violate the Fair Labor Standards Act may be liable for back wages and civil penalties.

You may ask, how much of this is really law since the DOL’s Field Operations Handbook is really neither a statute nor a regulation. The answer is, at least for now, that employers fail to follow the Field Operations Handbook at their peril in light of Fast v. Applebee’s International (Eighth Circuit found that the DOL’s interpretation was controlling). Employers of tipped employees should ensure that they carefully follow the rules pertaining to tip credits as outlined by the Fair Labor Standards Act, the federal regulation, and the Department of Labor’s Field Operations Handbook.

The law in in New Hampshire has a less dramatic history. Briefly, the tip credit wage rate in New Hampshire is $3.27 per hour instead of the $2.13 required by Federal law. An employee, however, must be engaged in work related to their tipped occupation for a tip credit to be permitted. A tip credit is therefore only permitted for side work that is “incidental” to an employee’s tip producing activities. An employer must pay the full minimum wage for any side work that is not incidental to an employee’s tip producing activities.

The Lesson:

Try to limit side work to work truly incidental to the server’s tip producing activities. The DOL’s Handbook is a good guide under federal and New Hampshire and Massachusetts law, but know that other states may be more restrictive.