It Is Illegal For a Restaurant or Hotel to Keep Gratuities or Tips Meant For Its Waiters

The lawsuit seeks to recover misappropriated service charges and special banquet gratuities for banquet waiters which The Waldorf led customers to believe were gratuities or tips to be paid in their entirety to their service staff, but were actually kept by the house. This practice was held by the New York Court of Appeals to be unlawful in the case of Samiento v. World Yacht Inc. In that case, the Court of Appeals concluded that a mandatory service charge may be a “charge purported to be a gratuity” within the meaning of the New York Labor Law.

The Samiento case relied on Section 196 New York Labor Law, which requires that:

No employer or his agent or an officer or agent of any corporation, or any other person shall demand or accept, directly or indirectly, any part of the gratuities, received by an employee, or retain any part of a gratuity or of any charge purported to be a gratuity for an employee.

Country Clubs and Catering Halls Have Also Been Sued

The practice used by The Waldorf is not uncommon. Indeed, many catering halls, country clubs, and restaurants add a service charge or gratuity to the bill but do not pass on these gratuities or tips to their waitstaff. Berke-Weiss & Pechman LLP has a pending lawsuit against Wheatley Hills Country Club in Nassau County, New York on a similar issue, Maura Penteck v. Wheatley Hills Golf Club, Inc., 10 Civ. 549 (EDNY). Given the pervasiveness of this unlawful practice, we believe that disputes over banquet service charges will be the next lawsuit du jour in the New York hospitality industry.

The wave of sexual harassment claims in the restaurant industry has led to notable settlements and damage awards.  Only one month before the EEOC filed suit against Sparks Steak House, the EEOC settled a similar male-on-male sexual harassment case for $345,000 with the Cheesecake Factory, a nationwide restaurant chain.  The EEOC recently settled a sexual harassment lawsuit for $255,000 with Ruby Tuesday after five female employees alleged that a general manager made crude sexual propositions to women and frequently made sexually explicit and graphic comments to them.  In addition, a federal jury recently returned a verdict for $105,000 in a sexual harassment lawsuit against IHOP Restaurant, where two female employees claimed that an assistant manager groped them and subjected them to sexual propositions.

The Sparks lawsuit is part of a significant uptick in sexual harassment cases in the restaurant industry.  The EEOC’s lawsuit signals that restaurants face an increasing risk that they will be sued by their employees for sex harassment if they do not prevent or effectively address harassing conduct.

Certified public accountants generally meet the duties requirements for the learned professional exemption.  In addition, many other accountants who are not certified public accountants but perform similar job duties may qualify as exempt learned professionals.  However, accounting clerks, bookkeepers and other employees who normally perform a great deal of routine work generally will not qualify as exempt professionals.

Regardless of the title used, determination of whether an accountant is exempt from the FLSA is made by the courts by analyzing actual job duties.  If the job does not require a CPA license and the accounting employees are not given independent discretion in decision-making, junior accountants or associate accountants could be entitled to overtime pay for hours they work over 40 in a given week.  The key inquiry is whether work done is routine or that of a learned professional.  The question is worth examining because misclassification of a non-CPA accountant as “exempt” from the FLSA can be costly, subjecting an employer to back pay liability for overtime, as well as liquidated damages,  leading to a substantial monetary recovery by the employee.

Recently, accounting firms and financial services companies have been subject to lawsuits, some of which are class actions, brought by junior accountants and associate accountants claiming they were misclassified as nonexempt, and seeking to recover unpaid overtime.  In one case, decided in December 2009, a federal judge in Connecticut declined to dismiss a wage and hour case brought by JP Morgan Chase accountants who worked in their hedge fund services business.  The accountants claimed they were merely “internet age bookkeepers” whose positions did not require knowledge of accounting, thus making them eligible for paid overtime.  The court determined that the nature of their primary duties was a question of fact to be determined at trial.  A jury now will decide whether these accountants were or were not exempt.