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Will "No-Tipping" Trend Hurt New York's Restaurant Servers?

Tipping has long been an integral part of American restaurant culture–so much so that a “tip credit” is built into the minimum wage laws. In New York City, for example, employers with 10 or fewer workers may apply a $3.00 per hour tip credit towards the minimum wage paid to food service workers. Of course, this must be based on actual tips received.

There has been a growing movement in recent years, at least at the higher end of the restaurant industry, to eliminate tipping and pay employees a higher base wage. In a 2013 article for Slate, one San Diego restaurant owner explained that he added a flat 18% “service charge” to all customer checks and “refused to accept any payment beyond that service charge,” i.e. tips. The restaurateur said this allowed him to distribute revenue “to our cooks as well as our servers, making our pay more equitable,” as kitchen or “back of the house” workers usually do not share in tip income.

Class Action Accuses New York Restaurants of Price Fixing

Are “no-tipping” rules really better for employees or just an excuse for owners to line their own pockets? A recent class action filed against the owners of a number of high-profile restaurants in New York argues that far from trying to improve conditions for workers, no-tipping policies are actually a conspiracy that violates federal antitrust law. The lawsuit, filed in California federal court on October 6, specifically identified a major New York restaurateur as a ringleader in the purported conspiracy, which the lawsuit claims “unlawfully transfers millions of dollars from customers and servers to restaurant owners.”

The lawsuit cites surveys that show restaurant servers in New York City typically earn between $25.34 and $27.48 per hour with tipping, and that it was highly unlikely these workers would make the same cash wage under no-tipping policies. Indeed, the lawsuit points to statements made by the defendant restaurants as evidence they want to intentionally lower server wages in order to reduce the pay disparity with kitchen staff–a problem that could be solved by simply paying them more.

The lawsuit alleges the various “no-tipping” discussions among the restaurant defendants violate both federal antitrust law and New York State's Donnelly Act, which both prohibit “price-fixing” agreements. The class action seeks a judicial declaration ordering the defendants to “withdraw from the conspiracy” and pay to class members–essentially any customer or server affected by existing no-tipping policies–an unspecified amount of damages.

Has Your Employer Cheated You Out of Wages?

Whether this class action has merit has yet to be determined. No-tipping policies may not be sustainable even without legal action. The lawsuit discussed above even cites one case where a well-known restaurant abandoned the idea “because customers didn't like the no-tipping system and servers 'voted with their feet' and quit.”

While it is not against the law for a New York restaurant to prohibit tipping, it must still comply with all minimum wage and overtime laws applicable to all employers in the state. If you suspect your employer is treating you unfairly with respect to a wage hour issue and need to consult with a qualified New York employment law attorney, contact the Law Offices of Mahir S. Nisar today.

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