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Waiters to get $8.5 million back in tips

A New York banquet hall settles a lawsuit to pay waiters tips it never handed over. It’s the latest and biggest payback for jilted waiters.

Kai Ryssdal: You go for a meal, the check comes, you've got to do a litttle math to figure out the tip.

Here's a handy go-to guide. How 'bout $8.5 million?

That's how much the Manhattan banquet hall Pier Sixty has agreed to pay to settle a lawsuit. Waiters and waitresses claimed the company didn't hand over gratuities that had automatically been added to the tabs for large parties. It's the latest -- and believed to be the biggest -- settlement for waiters who say restaurants are raiding the tip jar.

Sally Herships has more.


Sally Herships: Before 2008, if you thought you were tipping your waiter or waitress, you might not have been. The Department of Labor said restaurants could add a service charge to a check but it didn’t have to count as a tip.

Carolyn Richmond is a partner at Fox Rothschild. She represented Pier Sixty.

Carolyn Richmond: Call it a service charge, tax it, inform your guests it was a service charge and pay your employees at least minimum wage. You were doing things correctly.


But then, in 2008,  New York's highest state court ruled that if customers think this automatic charge is a tip, the money has to go to the wait staff. Restaurant management wasn’t happy, especially since they could be liable for tips going back six years. And Richmond found herself going to court for lots of restaurants, including those owned by celebrity chef Mario Batali.

Richmond: So to now to be told, uh oh, that wasn’t right, and now you’re being held liable for up to six years of service charge which could be upwards of 20 percent or more of the event cost, that’s a lot of money.

Mario Batali’s business recently settled one of these lawsuits for more than $5 million.

Maimon Kirschenbaum represents waiters and waitresses in lawsuits like these against restaurants. He says they’re  among the most exploited workers.

Maimon Kirschenbaum: Most of their money is in some way or another distribution of tips. If they’re not getting 10 percent of their tips, that’s 10 percent less money that they’re making.

And waiters have also brought class action suits in states that have similar labor laws: Massachusetts, Hawaii and California.

In New York, I’m Sally Herships for Marketplace.

About the author

Sally Herships is a regular contributor to Marketplace.

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