Restaurant Repays Staff $624,000 In Tips After Tip Pool Ruled Illegal

A restaurant in South Carolina has been ordered to repaid $624,000 (£510,550) to workers after the Department of Labour found it had illegally forced them to share tips with other members of staff.

An investigation into Charleston-based eatery 167 Raw found that employees were forced to enter a tip pool that included management and other typically non-tipped employees.

This arrangement made employees share tips illegally and invalidated the business' claim to a tip credit, meaning staff were paid less than the federal minimum wage.

According to a statement released by the department, a total of 92 workers were “short changed” and are set to be repaid around $6,700 (£5,480) each.

Pexels)

Under the state’s Fair Labour Standards Act, managers and supervisors are not allowed to keep their workers' tips "under any circumstances," including through tip pools.

US employers can pay tipped staff as little as $2.13 (£1.74) an hour, with tips bringing their take-home pay up to a minimum of $7.25 (£5.93) an hour.

In a statement shared with UNILAD, 167 Raw King Street LLC, which owns the restaurant along with two other Charleston-based eateries, said that it entered a voluntary agreement with the Department of Labour over its tipping policy.

They added that before setting up the tip pool they had been advised by lawyers that the move was legal and clarified that the company’s owners were never included in the tip pool.

Pexels)

They said: "A tip pool was established to include and compensate our team members who are integral to a positive dining experience at our restaurant.

"Before establishing the pool, we sought advice from legal counsel and were told that it was legal and appropriate to do so. Months later, however, the Department of Labor concluded that these procedures were in direct violation of certain federal guidelines.

"The department began a full investigation and determined that while we had not intentionally violated any regulation, we had instead relied upon incorrect legal advice."

167 Raw King Street added that they have been working with the Department of Labour to put new procedures in place and corrected the "misallocation of tips." 

"The full details of this were disclosed to our team members and compensation was handled accordingly.

"We fully cooperated with the Department of Labor to establish new procedures within the department’s guidelines and took the necessary steps to correct the misallocation of tips.

"We continue to prioritize our team members and choosing to enter this voluntary agreement with the Department last year ensured that our valued team members continue to be well compensated within the framework of evolving federal guidelines.”

The latest furore in the hospitality sector comes two months after it was revealed that 810,000 workers in the food services and accommodation sector quit their jobs in a report by the Bureau of Labour Statistics.

The hospitality industry in the US has seen a mass exodus of workers in the wake of pandemic, with many blaming the sector's low wages, lack of benefits, and poor working conditions.

If you have a story you want to tell, send it to UNILAD via [email protected]