It has been almost two years since former bartenders and employees of Don’t Know / No Idea Tavern filed a lawsuit against owner/operator Jason Zink, a civil suit that has devolved into little more than a mexican standoff during that period of time, until recently when federal judge Richard Bennett issued a first-of-its-kind 22-page opinion on the case. An opinion, which, depending on how you view it could change the way owner operators of bars and restaurants conduct their business.
FROM THE TOP
In case you’re unaware of the development up to this point, here’s the immensely short version: Zink, who does not award himself a salary as manager or owner of Don’t Know or No Idea Taverns (will now be referred to as DKNI), would often work shifts as a bartender at Don’t Know and participate in pool tipping with his other employees as a means of income. A practice which, up until now, is illegal in and of itself if the owner/operator is acting in a managerial fashion. The remaining three plaintiffs of the civil suit – Tara Gionfriddo, Eric Gilbert, and Aaron Zetzer – argue that it is impossible for him to operate solely as a bartender when he is the sole proprietor, and are suing him for lost wages in violation of Federal and State Fair Wages laws as a result, as he was never entitled to pooled tips. In other words, their claim is that by taking his cut Zink in effect lowers their wage to below minimum which violates tip credit law AND tip pooling regulations, as the sole proprietor. Their initial claim was for $250,000 in damages.
Zink fully admits that he engaged in tip pooling, but defends his position that he functions as an “employee” while acting as bartender, a question which has never been brought before a court of law before. While addressing that issue, the question of whether he was illegally engaging in tip pooling “willfully” – that is, he knew it was illegal and still went through with it – has to be answered and is nearly impossible to prove. Not surprisingly the plaintiffs claim he did so willfully, while Zink claims he did not, but misunderstood the FLSA guidelines for tip pooling. This issue will greatly affect the total amount of damages awarded in addition to liability.
One odd thing regarding the opinion is that in order to be protected by the FLSA, an employee must be, well, employed by a business. Part of that legal definition includes gross revenues in excess of $500,000, which Don’t Know Tavern cannot claim. However, since DKNI are owned by Zink under separate LLCs, the judge deems them a single enterprise which does book revenues over $500k. So essentially, revenues from No Idea are legally linked to Don’t Know despite the fact that they are legally owned separately. (e: this says to me “go ahead and violate FLSA as long as your bar doesn’t book over $500k)
Getting back to the FLSA, it states clearly:
An Employer-Owner May Not Share In An Employee Tip Pool Under The Fair Labor Standards Act […] to eliminate labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.
In other words, so they can earn minimum wage. Again, Zink asserts that he was not acting as an Employer-Owner but rather an “Employer-Employee,” a designation which does not legally exist, but soon may be rendered completely illegal altogether. Again, this is the most important aspect of the lawsuit, as it has never been dealt with in any court of law – and essentially every bar owner everywhere on Earth does it.
Just a few observations here, which rather than going into a long-winded tl;dr, I’ll provide as a bullet list (and believe me, none of this is personal gang):
- Initially, the civil suit was filed after the five employees involved left their employment (for whatever reason) or were let go (fired), yet no one raised any eyebrows as to the tip pooling *while* employed.
- Any bartender that can claim with a straight face that they make less than minimum wage after tips at a successful bar – even with another bartender diluting the tip pool – probably uses the same straight face to claim their tips on their tax form.
- At this point, the legal fees are probably so high they *have* to go to trial and go for $250,000 in damages, as they’re 2 years pot committed.
- Really? $250,000? Claim something easy like $50,000 and they 110% could have walked away really happily two years ago.
- This is America.
SO WHAT NOW?
As it would seem, a trial has been set for September. No doubt as a result of over two years of legal drain this entire case more than likely will cost in the upper range of a gajillion dollars, taking into account the ongoing legal fees, court time, etc. – when it could have just as been easily settled out of court for a fraction. The plaintiffs have their right to a trial and whether or not they truly feel as though their rights as employees had been violated or it’s a personal vendetta against an ex-employer, doesn’t really matter.
So here now we’re presented with a bunch of scenarios in which this law is increasingly hard to contextualize, most of which have been presented to me while conversing with bar owners around town:
- “What about family owned establishments where the husband is the owner, the wife is the chef and the daughter is the bartender?”
- “What if you decide to bartend as an owner on an incredibly busy evening and you’re earning tips for the rest of your employees – they end up making more on your effort?”
- “If you’re an owner/employer/employee currently engaging in tip pooling, it looks as if as long as you’re not booking $500k in revenue and you don’t have pissed off ex-employees, you’re probably ok. Otherwise, just sit on your ass and tell them what to do and they can’t sue you!”
- “Which would piss off the other bartenders more – earning a salary that could be twice as much as they make just as a bartender, or earning the same as them while not taking a salary?”
And the judge provides no solutions for these matters yet, legally or otherwise. Looks like it’s up to the court decide in September.