Outback Steakhouse ordered to pay $1.25 million in tip-sharing lawsuit

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Outback servers won a class action lawsuit over tip pooling.
Tip-pooling--when a restaurant's waitstaff shares a percentage of their gratuities with untipped staffers, such as bussers and dishwashers--has become a popular practice at some local restaurants, including Piccolo and Travail.

But while the practice is kosher under federal law, Minnesota state law states that employers cannot require employees to pool tips--they must do so voluntarily.

In fact, a U.S. District Court in Minnesota recently approved a $1.25 million settlement for a lawsuit between OSI Restaurant Partners LLC (the parent company of Outback Steakhouse) and about 1,200 Outback Steakhouse servers in Minnesota, who alleged in that their employer required them to share their tips with bussers and hosts.

The class-action lawsuit was filed last year and the court ruled that the tip-sharing violated the Minnesota Fair Labor Standards Act prohibition on employer-run and mandated tip pools. Outback issued a statement saying that they believed their practices fell into accordance with state law, but that they settled to avoid the hassle and expense of prolonged litigation.

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Minnesota is one of the few states that have figured out that the only way to protect employees to the tips they have been given is to let customers decide, for themselves, who their tip belongs to and how much belongs to them. When tips are viewed as property belonging to some group of workers, there is no way to sort out which workers are actually entitled to a share and what portion of the tips each is entitled to. Tip pools should never be required because when they are there is no way to figure out how much each person should be entitled to. When tips are properly regarded as the property of the individual who received the tip, there is clarity on who the tips belong to and what amount belongs to them. Most states are still viewing tips as something employers can make their workers pool or give to other workers. However when tips are errantly regarded in such a manner, there becomes questions that can never be answered. What portio, of the tips a waiter has been given is the waiter legally entitled to retain as his own? How many other people are entitled to a share of the tips a waiter receives? How much is each of these workers entitled to retain as their own? The reason such questions must be answered is, federal laws state that all tips received by the employee are to be retained by the employee. In order for this law to actually protect employees, there has to be a way to figure out how much each employee is legally entitled to retain as his own. The way Minnesota's laws work is, they leave it up to each customer to decide who his or her tip belongs to and what amount belongs to that particular worker. Once the customer gives a worker a tip, there becomes no doubt as to who the tip belongs to and what amount belongs to them.  What other states are doing is, they are viewing tips as belonging to all those who may have aided in serving the customer, as if customers want someone else distributing their tips for them. The problem with viewing tips in such a manner is, there is no way to figure out which employees the customer might have wanted to tip and what amount he might have wanted them to have. When tips are viewed as the property of all those who helped in serving the customer, there is uncertainty of who deserves what and how much each is entitled to. Some workers provide more service to the customer and deserve more, while other don't really provide much service and deserve much less. But how can it be sorted out? It can't be sorted out. The customer basically has no say with this system. Instead of customers deciding who their tip belongs to, the courts or government agencies will have to try to guess at who the customers wanted to tips. Instead of customers deciding who their tip belongs to, someone other than the customer will have to guess at how much each employee is entitled to. If no one is able to figure out who is actually entitled to these pooled tips and what amount they are entitled to, then federal laws which state that all tips received the employee are to be retained by the employee will act ot protect no one. How can an employee retain all his tips when no one can figure out how much he actually received? States that suggest that it's legal for employers to require tip pooling are basically nullifying federal law. What they are saying is that the tips given a worker don't actually belong to him and, as such, he cannot retain all the tips he has received as required by the Fair Labor Standards Act. Instead, tips will be viewed in a manner where no employee can actually retain all the tips he has received due to the fact it's an impossible task to figure out exactly how much each customer wanted him to have. Minnesota does not have labor laws that are stricter than federal law. What Minnesota has is labor laws that properly interpret federal laws in manner that provides employees with the protection our laws where intended to provide them.

The Facts
The Facts

Actually, federal law does DOES allow for tip pooling.  Specifically (and directly from the US Department of Labor's website) it says: 

"The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders. A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors."

Federal law only requires that tipped employees be informed of the pooling amounts, and that all pooled amounts must be distributed completely to tipped employees, and may not be kept by the employer for any reason. 

Your contention that the Minnesota's labor laws are less strict than those of the federal government is simply not true.  Minnesota has not gotten it right.  Just like California, they are supporting an environment of separatism and greed.


You want to talk about greed? How about the multi million dollar company who forces the poor waitstaff to share the tips they earn with the hosts and bartenders so that they can pay their hosts and bartenders half of minimum wage? In most states, the waitstaff earns $2.13 per hour....but they will absolutely not see one penny of that $2.13 per hour because it will all be absorbed by taxes. A server's paycheck will almost always be ZERO. Despite not receiving this $2.13 per hour, they will also pay taxes at the end of the year when most other people are receiving tax refunds. Depending on their particular situation, they may owe as much as $1500 or more in taxes. Now they expect waitstaff to also pay for the host and bartender salaries? You actually believe that the few states which allow the server who earns his/her tips to actually keep ALL of his/her tips are supporting an environment of separatism and greed? You couldn't be more wrong. How would you like it if you had to pay out of your pocket for your coworkers salaries? How does that make sense to you? I work as a bartender for a casual dining chain. In the beginning, I was paid $7.00 per hour, plus whatever tips I earned from my guests during the shift, plus whatever tips the waitstaff decided to share with me. This amount varied enormously from server to server, and shift to shift, depending on many factors occurring during each shift. Some wouldn't tip at all, while others would share up to $20. On average, you would receive around 10% of whatever alcohol sales the server had during their shift. Then our company was purchased by Darden Restaurants, and everything changed. They lowered my wages to $3.50 per hour, and established a forced tip sharing program which was supposed to make up the difference in hourly pay they were no longer required to pay me. The problem here is that it doesn't come close to making up the difference. I had to cancel my benefits in order to continue receiving a paycheck each week, in the amount of $40-60. PER WEEK. The tip share, on a great night, will be $20-25, but is more typically $10-15 per shift. Remember, I would receive up to $20 from just one member of the waitstaff on any given night. And since there are anywhere from 7-14 servers working at a time well, you do the math. And this is all so that the multi million dollar company can get richer while the people who are actually taking shit from the general public, making these companies successful, gets poorer. So the next time you are out at an Olive Garden or a Red Lobster or a Longhorn Steakhouse, just remember that out of the $7 tip you may or may not give your server, they probably get to keep about $4 of it. How much do you make per hour? Think about it. Peek around the corner and see what is really going on. Most of the time, your server is dealing with overworked, underpaid, disgruntled kitchen staff who couldn't care less about your meal, let alone that tip you may or may not leave your server. Everybody ought to be required to work in a restaurant for a year, just so they understand what kind of hell it really can be. The money and flexible schedule can make it worthwhile, but these tip share programs are a legal form of extortion. It is extreme corporate greed at its worst. Clarence Otis makes over $5 million a year, and these are his companies. His waitstaff probably pulls in a whopping $10-20K in the same amount of time. You tell me who is greedy. Just because you can get away with it doesn't mean you should.


In N.C., Fl,Ga, and NY one arm of this company's employees are fighting back! Just Google  this company's fine dining steak house chain with the word "lawsuit". The complaint outlines how many other positions these employees "tip out". Plate scapers, dishwashers, silver polishers, and then all the regulars like bussers,runners,bartenders. Now keep in mind that the restuarant is now entitled to take the tip credit for these folks, so they force the" tip out" so they don't have to pay these workers.In my store, we were told the new policy is to make the servers run food as the runner position is abolished. So one of my wait shifts was taken and replaced w/runner shift and I still only make 2.13 hr and they force my co-workers to "tip" me. I can not believe that they ever made the top 100 place to work. Most of us can't even afford thier crappy" Wavier issued" health insurance policy.

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