9th Circuit Revives Landmark Tipping Lawsuit

The U.S. Court of Appeals for the Ninth Circuit has revived a lawsuit, Alec Marsh v. J. Alexander’s LLC, filed by a group of servers and bartenders that could have major consequences for the restaurant industry in some states under federal law. The lawsuit addresses whether a subminimum wage can be used for non-tipped work, otherwise known as a “tip-credit”.  Under federal law, and in some states, employers are allowed to credit tips toward the employee’s minimum wage. California law does not permit tip-credits, and thus all restaurant employees in the state must be paid at least minimum wage even if they receive tips.

The lawsuit was filed by a server, Alex Marsh, who alleged his employer unfairly paid a tip-credit wage for tasks unrelated to serving, like maintaining the soft drink dispenser and cleaning toilets. Thirteen other servers and bartenders joined in the lawsuit alleging similar complaints at franchised units of Denny’s, IHOP, P.F. Chang’s China Bistro, Arriba Mexican Grill and an AMC Theatre.

Alexander’s had won a dismissal of the case at the district court level. But the Ninth Circuit reversed that decision, thereby validating the plaintiffs’ complaints and agreeing with a similar argument in the Eighth Circuit. At issue in the lawsuit is the Department of Labor’s guidance that prohibits restaurant employers from using a subminimum wage if workers spend more than 20 percent of their time on non-tipped work, commonly known as the “80/20 rule.”

Marsh argued that he spent more than 20 percent of his time on non-tipped work, but the Phoenix-area J. Alexander’s where he worked paid him the tip-credit wage. For any questions about the law on tipping, please give us a call at Toll Free 1-562-888-0126 or email sales@yourvirtualhr.com for more information.

For more information about Alec Marsh v. J. Alexander’s LLC, as reported in Nation’s Restaurant News, on September 20, 2018, click here.