The Supreme Judicial Court recently heard arguments in a case that will determine whether employers can impose "tip-pooling" agreements on employees engaged in food and beverage service.
The case — closely watched by the employment bar — has also raised issues about whether managers can share in such pools and whether employees have a statutory right to class certification for decision of tip-pooling disputes.
The SJC will decide whether Superior Court Judge Patrick F. Brady correctly interpreted G.L.c. 149, Sect. 152A in ruling for the defendant restaurant on all issues raised in a motion for summary judgment.
Shannon Liss-Riordan of Boston, counsel for the plaintiff restaurant servers, said that the decision "will have significant day-to-day impact on all food and beverage service employees for restaurants, hotels and country clubs."
She argued that the plaintiffs were seeking a statutory interpretation that upholds a traditional industry practice of letting servers voluntarily "tip out" chefs, dishwashers and other back-room help.
Liss-Riordan added that the Attorney General's Office filed an amicus brief supporting this interpretation and calling attention to interpretive advice it has provided previously.
But Christopher P. Litterio of Boston, counsel for the defendant restaurant, contended that "the intent of the statute is for service employees to receive 100 percent of the tips made by customers."
Given that rational basis, he suggested that "so long as the owner is not sharing in the tips, it is acceptable practice for the employer to determine the percentage breakdown among service employees."
Litterio also noted that the Massachusetts Restaurant Association filed an amicus brief supporting this interpretation and supporting the practice of including managers in tip pools when they actually participate as service providers.
Briefs of the parties in Fraser, et al. v. Pears Company, et al. can be found in the SJC Docket section of our website.
Pooling Payments
The defendant, Pears Co., Inc., operates the upscale French restaurant L'Espalier, located in Boston's Back Bay neighborhood.
Since taking over the restaurant in 1988, the defendant perpetuated a practice established in previous years of pooling tips and distributing them among employees according to a formula.
The system is mandatory and wait staff are given no discretion to determine any part of the formula or percentage sharing.
The defendant's president, who is also a chef, set the formula to include the manager and maitre d', Louis Risoli.
In June 2001, the wait staff at the restaurant met among themselves to discuss the tip system and all but one signed a petition objecting to the practice of submitting their tips to a pool.
On June 26, 2001, plaintiff James Fraser and another waiter spoke to Risoli about their belief that the tip system was illegal.
After some heated discussions, the president asked the wait staff to observe a "cool down" period of one week before raising any further issues about tip pooling.
During this time, a number of wait staff filled out sheets at the end of each shift indicating their preference for tip distributions by shift.
The president ordered that notebooks containing such sheets be removed from the restaurant, but some wait staff allegedly persisted in making the sheets an issue.
As a result, Fraser and others accused of disruptive conduct were terminated in early July 2001 for insubordination.
Six of the waiters who signed the petition were not terminated, but those who were filed suit on behalf of themselves and all others similarly situated pursuant to G.L.c. 149, Sects. 152A and 148A.
Defense Position
Litterio said that lawyers are very concerned about the legality of tip pooling now, noting that this case could provide some much needed clarification.
He stated that the second clause of the tip statute authorizes employers to exercise dominion over tips made through credit cards, arguing that it is unreasonable to think that the validity of tip pooling turns on the way in which a customer left the tip.
Litterio added that in many "high-end" restaurants, "the reality is that a table, depending on the size, might be serviced by as many as two front waiters, two back waiters or bussers, the sommelier, and the maitre d'."
Litterio cited practical concerns with putting cash tips into the exclusive dominion of wait staff as well.
He asserted that employers would have no credible way of verifying the tipped income amounts for purposes of reporting, and he suggested that wait staff could be taxed on 100 percent of the tips they control with no deductions for or recording of how much they paid out to others.
Litterio also noted that the attorney general has pushed for legislation to broaden the definition of tipped employees while acknowledging that the existing law is at the least unclear to some employers.
"Where a statute is unclear and carries criminal penalties, such as fines, any ambiguity should be resolved in favor of defendants," Litterio argued.
In response to the plaintiffs' assertion that the maitre d' should not share in the tip pool as a manager, Litterio noted that the defendant's maitre d' primarily greeted, seated and attended to guest concerns during active dining hours.
He added that the FLSA explicitly allows for tip pooling while federal cases interpreting that act have allowed maitre d's and hosts to participate in tip pools.
Litterio also argued that the Superior Court's denial of the motion for class certification was not an error because the Wage Act does not displace the Rule 23 requirements for judicial certification of a class.
"We should not create a separate standard for class certification outside the procedural rules," he asserted.
Regarding the issue of retaliation, he said that it was one that "could have far broader implications outside this case."
While Litterio maintained that the plaintiffs were terminated for refusing to accept the fact that the employer had the right to direct them at work, he acknowledged the plaintiffs' concerns about a sphere of protected activities in asserting legal claims.
"But we have to ask when does the employee cross the line from protected activity into disrupting the business," he said.
He recalled that SJC Justice Robert J. Cordy asked a similar question about what should happen "if a waiter stood in the middle of the restaurant with a sign that the employer was unfair."
Litterio asserted that the plaintiffs were fired for insubordination and not for expressing their views or asserting their legal rights.
Plaintiffs' Argument
Liss-Riordan maintained that "there is a big difference between voluntary tip sharing and mandatory pooling controlled by the employer."
In the system at issue, she explained that "the tips must be shared with people who are not even necessarily serving the patrons that left them."
Her contention is that this not only runs counter to customer expectations but also violates the letter and spirit of the statute, G.L.c. 149, Sect. 152A.
Since the statute prohibits an employer "or other person" from requesting or accepting payment from tips received by an employee, Liss-Riordan argued that no "back-of-the-house staff" or management personnel should be exercising rights over the tips.
She added that the statute treats "service charges," such as those imposed on large parties, separately from "tips," arguing that such a distinction would be meaningless if the employer can assert dominion over either type of payment in the same way.
Liss-Riordan also noted that the Attorney General's Office has flatly stated on its website that "it is illegal for an employer to require an employee in the service of food or beverage to pool, split or share their tips with management or other employees."
On a separate point, Liss-Riordan argued that the restaurant manager is the legal equivalent of the employer for statutory purposes, and she cited cases for the proposition that federal law prohibits tip pooling where an employer claims a "tip credit" on servers' wages for purposes of complying with minimum wage law.
She additionally cited a number of cases from other states prohibiting tip sharing with managers.
The plaintiffs' lawyer also rejected the notion that managers can share in tips if they are actually providing some support service to patrons or wait staff.
Her contention was that no one would be excluded from tip sharing under that model, given that the nature of every employee's job at a restaurant involves support service of some type.
Liss-Riordan raised another point that could affect potential plaintiffs in many other cases from other industries, arguing that the Wage Act independently authorizes employees to bring private actions on behalf of others to enforce the statute.
"The AG has limited resources and this provision explicitly allows one brave employee to speak out for the benefit of others," she maintained.
March 22, 2004
