INDIANAPOLIS, Ind. — The parent company of an Indiana Chili’s Grill & Bar recently agreed to a $250,000 settlement to resolve claims that the restaurant engaged in systematic wage theft against servers, a violation of the federal Fair Labor Standards Act (FLSA). According to reports, the judgement could have been much more substantial had the workers not been forced to sign arbitration clauses preventing the employees from banding together in a class action minimum wage pay lawsuit against the company to recover lost wages as a group.
A group of 15 current and former servers originally filed their class action wage theft lawsuit in federal District Court for the Eastern District of Pennsylvania Quality Dining Inc. and Grayling Corp. of Mishawaka, Indiana over allegations that the defendants took an illegal tip credit from servers at the restaurant. The lawsuit claimed that the servers earned an hourly tipped rate of $2.83 per hour, plus tips to earn the federal minimum wage of $7.25 per hour.
While it is perfectly legal for employers to deduct earnings from a server’s wages to create a tip pool and supplement the income of other front of the house workers engaged in customer service, many restaurants, including those named in this case, often use the practice to pay for back of the house workers. Under the FLSA, back of the house workers such as cooks, prep staff, and dishwashers can not have their income supplemented by tip pools from servers.
In March, the federal judge hearing the case dismissed the lawsuit after the defendants file a motion that showed the workers who brought the suit had already signed arbitration agreements as a condition of their employment. The plaintiffs appealed that ruling to the U.S. 3rd Circuit Court of Appeals, arguing that the National Labor Relations Act gives workers the right to band together and negotiate wages and other employment grievances. That appeal was dropped after the two sides agreed to the settlement and resolved the claim.
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