One Fair Wage Slams Darden Restaurants’ Wage Practices

Oakland, CAOne Fair Wage (OFW), a national advocacy organization, filed a lawsuit in the Northern District of California that challenges Darden Restaurants’ policy requiring payment of the lowest legally permissible wages to servers and other employees who receive tips. Under California prevailing wage law employers of 25 or fewer workers, including tipped workers, must pay the workers at least $13 per hour. Employers of 26 or more employees must pay all workers at least $14 per hour. Local minimum wages may be higher. Unlike some other states, California labor law does not permit employers to offset tips from customers against their own legal obligation to pay the minimum wage. For brevity’s sake, this is often referred to as the “tip credit.”

Darden Restaurants operates casual dining restaurants in all 50 states. These include well – known establishments, like Olive Garden and LongHorn Steak House. One Fair Wage Inc. v. Darden Restaurants, Inc. focuses on the discriminatory impact that Darden’s adoption of this practice has (in the states that permit it), especially for women and workers of color. OFW is suing on its own behalf, however, not as a representative of the workers. The organization alleges that it has been harmed because it has had to divert monetary and non-monetary resources to assist Darden Restaurant workers.

Tipped wage basics

Under the federal Fair Labor Standards Act, the minimum wage is $7.25 per hour for most wage workers. The minimum wage for certain categories of tipped workers is $2.13 per hour, where it has been since 1991. Section 3(m) of the FLSA permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage ($2.13) and the federal minimum wage ($7.25). Thus, the maximum tip credit that an employer can currently claim is $5.12 per hour. State and local wages may be more generous, but not all are. Many simply adopt federal standards.

Workers are taxed on 100 percent of their cash tips. The recordkeeping and reporting are often left up to the servers and bartenders and, quite frankly, that can be onerous. The net effect is that many tipped workers make less than the federal or state minimums.
As the OFW Complaint argues, that also leaves many tipped workers very financially dependent on customers who may be interested in benefits other than prompt service. Considerable sentiment exists in support this argument, including “Tipping Is a Legacy of Slavery” and “How Low Wages for Tipped Workers May Invite Sexual Harassment.” An atmosphere of harassment and abuse breeds more of the same, even from co-workers – in other words, the workplace from hell. 

More fallout    

 
The Complaint is rife with stories of abuse and harassment -- unwanted touching, racial and sexual slurs, assignment to less desirable “Section 8” tables based on race. But at its core, One Fair Wage makes what is essentially a “disparate impact” argument under Title VII of the Civil Rights Act of 1964. Disparate impact refers to discrimination that is unintentional. The rules and procedures are the same for everyone, but people in a protected class are more likely to be negatively affected. In this case, the federal tipped wage rules are neutral on their face, but as applied at Darden Restaurants establishments, they affect women and workers of color disproportionately. Both of these groups are specifically protected under the law. Proving disparate impact can be difficult.

But, in something of an unexpected turn, this is not where the lawsuit goes, at all.

Harm to OFW

In the Complaint, OFW alleges that:

“Darden’s maintenance of the policies has caused monetary and non-monetary harm to One Fair Wage. One Fair Wage is not filing this action on behalf of any Darden employees or representing any Darden employees here; rather, One Fair Wage is seeking redress only for the harm that Darden’s policies have caused to One Fair Wage as an organization. The policies have caused, and continue to cause, One Fair Wage to divert its resources. For example, One Fair Wage has been forced to address complaints from Darden employees subject to the cash wage policy that they have suffered more and worse sexual harassment because of their sex than Darden employees not subject to that policy, as well as complaints from Darden tipped employees of color that they have received less in tips than Darden tipped white employees because of their race (the vast majority of whom suffer substantially because Darden already pays them a subminimum wage).”

This may be the lawsuit’s Achilles heel. OFW is, to be clear, a nonprofit advocacy organization. It defines its mission as ending all subminimum wages in the United States and improving wages and working conditions in the service sector in particular. “Fair Wage policy would require all employers to pay the full minimum wage with fair, non-discriminatory tips on top, thus lifting millions of tipped and subminimum wage workers nationally out of poverty.”

It aims to change policy. While an arguably good cause, this does not necessarily qualify as a “case or controversy” that can be resolved by the court system.