Minn. Supreme Court Rules on Wage & Hour Tip-Shortage Issue

The Minnesota Supreme Court made a recent big decision on how restaurants, bars and lounges in the state handle register shortages. Previously, some of these venues took deductions from employees’ tips to make up for any register shortages, or to cover “dine and dash” customers who paid without leaving. Long a staple of teenagers, the dine and dash is considered by some to be a rite of passage — but few people realized that someone had to make up for that loss, and it was often the server who had been spending the past hour taking care of those customers in hopes of a tip.

For many in the hospitality industry, they count on tips as the primary source of their income. However, sometimes it wasn’t even the intention of the customer to leave without paying. If a credit or debit card payment goes unsigned, that’s also considered unmade payment and Minnesota restaurant servers were getting stuck with those deductions, too.

According to the state’s Supreme Court, a wage and hour class action lawsuit was demanded against Uptown Drink Inc. in Hennepin County District Court. The purpose was to find out just what kind of damage was really inflicted upon the servers. Now shut down, the Minneapolis bar used to be an alleged example of tips getting unlawfully deducted from servers and bartenders alike. In total, 750 people employed or formerly employed by Uptown Drink joined the wage and hour lawsuit, suing the company and the president of the parent company.

Allegations in the wage lawsuit included violation of minimum wage division and violation of the Minnesota Fair Labor Standards Act (MFLSA). There’s also a wage deduction statute in the statute which this large group claimed was violated. Under Minnesota Statute 181.79, unlawful deductions were clearly a no-go in the state. However, the group claimed that their employer “required” them to use tips to pay for any shortages. Employees never knew exactly how much of their hard-earned tips they would be allowed to keep at the end of their shift, according to allegations raised in the class action lawsuit.

For many of these employees, after deductions were taken — many times for situations beyond their control — they didn’t even make minimum wage, the class action lawsuit claims. There’s nothing a server can do in a dine-and-dash situation or if a customer leaves without signing their receipt while the server is helping another table. Even cash register shortages may not be the server’s fault (and even if it is, they claim it isn’t a lawful practice to deduct tips).

In some instances, there’s a separate cashier at all times in certain restaurants. At other times, numerous servers are using the cash register and there’s no way to tell who’s to blame. Initially, the claims raised in the wage class action lawsuit were rejected at trial court for unlawful deductions under that particular statute and the Minnesota Court of Appeals agreed with the ruling.

However, once the wage and hour lawsuit was moved to the Minnesota Supreme Court, that decision was reversed. It was found that the other lower courts “misinterpreted” the Minnesota law and that the laws regarding deductions were indeed violated. This was a victory not just for employees of this diner and bar, but for those in the service industry around the country. There are an incredible number of people joining wage and hour lawsuits and class action lawsuits every month, and many of them are tip-dependent employees trying to make an honest living. By shaving hours, requiring tip deductions and “fixing” time sheets, just a few of the wage and hour shady practices, a company can easily make easy money off the employees they’re supposed to be protecting.

The Supreme Court Decision

The state’s Supreme Court decided that any tips a server earns is considered “wages” under state law. This led to reasoning that, since the Equal Pay for Equal Work law, clarifies wages as any money received for services (no matter who paid it), tips are obviously wages. This was the first step in getting these employees the compensation they’re already earned.

Then, the Supreme Court ruled that the statute doesn’t demand employees to showcase that deduction made their wage to go beneath the minimum wage. The Court decided that the whole purpose of this statute was to stop employers from claiming a debt from their employees. If tips weren’t wages, it was a loophole for employers to take advantage of their workers.

Finally, the Supreme Court found that the lower courts made a mistake when considering minimum wage as a pillar of the entire lawsuit. The issue at hand was really whether or not the employer used a “self-help” method to make deductions, not really the minimum wage issue. There was no argument from the restaurant about making those tip deductions — they freely admitted to it. This made the decision easy for the Supreme Court to rule against Uptown Drink.

A Lesson Learned

This is just one of the many examples of a wage and hour issue, and the Supreme Court recommends all in the service industry to carefully look at policies regarding automatic deductions. In Minnesota, an employees’ written consent has to be secured under specific circumstances to deduct tips.

Do you think you have a wage and hour legal claim? Learn more by visiting the Wage & Hour, Overtime Pay Class Action Lawsuit Investigation. Submit your information, and an employment lawyer will be in touch with you if you have a case for a free wage and hour claim review.