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Surly Brewing case provides guidelines on shared tipping

Tipping has topped the headlines throughout the Twin Cities, with the settlement of a $2.5 million class-action case against Minneapolis-based Surly Brewing Company and in ongoing debate of a $15 minimum wage for St. Paul. Changes at the federal level, part of the recently adopted omnibus spending package, could have an impact as to how tips can and cannot be shared.

The language was tucked into a few paragraphs of the 2,232-plus page, $1.3 trillion spending plan signed March 23 by President Trump. Restaurant owners are prohibited from sharing tips with managers, supervisors and themselves. But in some cases, employers will be able to share tips with lower-paid cooks, dishwashers and others working in the back of the house. This holds if the restaurant is paying minimum wage.

At the local level, the federal change is being eyed carefully. Attorney Ansis V. Viksnins, who specializes in employment law, said it’s too early to tell what the long-range impacts here will be of the federal change. “Minnesota’s statutes are unique, because they are more rigid than what we’ve had at the federal level,” he said.

Surly Brewing Company in March settled a $2.5 million class-action lawsuit that was launched in February 2016 by former bartender James Russell Conlon. Conlon contended that a company mandate on tip sharing violated state law. The case became a class action in May 2017. About 140 bartenders and servers will each get about $11,600. Conlon, who was fired for raising the issue, will receive an additional $15,000 through the Hennepin County District Court settlement.

 Attorney Steven Andrew Smith, who represented the employees, said the settlement may be the largest tip-pooling decision in state history. Surly has responded that it set up the tip pool in 2014 with the intent to be fair to all employees and comply with the law. The Minneapolis brewery now has a traditional tip system.

Viksnins said the Surly settlement shows how Minnesota employers must be “hands off” when it comes to tips. The challenge, though, is for employees to be able to organize a tip pool themselves and not have any employer assistance. But that has practical difficulties.

“Tip pooling in Minnesota really has to be employee-driven and employee-organized, with no involvement by the employer,” he said.

The changes at the national level will bear watching. The Washington Post reports that worker advocates and the National Restaurant Association are both claiming victory. The changes are seen by many as preferable to a proposed federal Department of Labor law floated last year, which would have legalized tip sharing. Workers criticized that proposal as allowing “wage theft.”

“In the face of unbelievable odds and powerful opposition by the National Restaurant Association, we won bipartisan support of tip protection legislation for tipped workers throughout the entire country. Congress, which has been notably divided and unable to pass legislation, came to an agreement that tips are the property of workers and codified that principle into law. This was not a matter of chance or the whims of politicians, but the result of sustained organizing and power of workers uniting,” the Restaurant Opportunities Center United said in a statement.

The NRA in 2017 petitioned the Supreme Court to take a stance on the legality of the practice. It also has a policy of calling for any type of changes affecting the industry to be enacted though law and not federal agency policy.

Since 2011 the restaurant association has worked to rescind an Obama-era federal regulation that broadly prohibited tip pooling for back-of-the-house workers, when employers claimed a federal tip credit. Tips as defined in 2011 are the employee’s property and could only be shared with employees who “customarily and regularly” receive tips. That left out owners, managers and back-of-the house workers. 

But the 2011 change didn’t address whether employers who didn’t claim the tip credit could start a tip pool. That sparked a long and complex legal fight between the Department of Labor, the restaurant association and worker advocacy groups. 

The labor department then proposed a rule that would under certain circumstances allow tip pooling with back-of-the-house employees. While that was seen as balancing pay disparities, worker advocates said the tips could be all too easily controlled by employers. Hundreds of thousands of people commented on the labor department website, most in opposition to the proposal. While being able to share tips is portrayed to retain lower-paid workers as income is balanced with servers and bartenders, many workers said that the practice could lead to employer mischief.

In scrutinizing more than 9,000 U.S. full-service restaurants between 2010 to 2012, federal officials found that nearly 84 percent of establishments had some type of wage and labor violation, including tip violations. 

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