Benihana Beats Server Suit Decrying Tip-Pooling Policy
Law360, Los Angeles (March 1, 2017, 7:29 PM EST) -- Japanese-style steakhouse and sushi chain Benihana Inc. dodged a proposed class action by a former server when a California federal judge said Tuesday the ex-worker failed to demonstrate how the company’s tip-pooling policy is actually an unlawful tip credit scheme.
The national chain was facing claims of conversion and violation of California’s labor code and the Private Attorneys General Act by the time the third amended complaint was dismissed after other claims previously had been trimmed, including failure to maintain and provide accurate wage statements.
In dismissing the complaint with prejudice without leave to amend for a fourth time, U.S. District Judge Jeffrey T. Miller said ex-Benihana server Brendan Wilkes failed to state a claim for the remaining counts, saying the chain’s tip-pooling policy was not unduly unreasonable and that the court was reluctant to impose an alternative policy for a commercial enterprise.
“While plaintiff may have preferred to keep a larger share of tips, an employer has wide latitude in devising tip-pooling policies to meet its business needs,” the judge said. “In the end, although the policy may not be perfect, plaintiff does not allege that it has ever left him without tips after a shift, and it does not require servers to go into their own pocket for contributions.”
Wilkes, who worked as a server at the Benihana restaurant in Carlsbad, California, for about a year, found fault with the chain's policy of divvying up the mandatory tip pool at the end of the night to pay all workers, including chefs, bartenders and busers. Wilkes claimed this policy amounted to an unlawful “tip credit” scheme in which the chain was using tips to subsidize submarket wages paid to nonservers, leaving few tips left over for servers.
Wilkes claimed that the tip pooling system, which is not prohibited in California, was being used as a “de facto tip credit” scheme to offset market wages for nonservers who wouldn't ordinarily receive tips.
But the judge noted that since the complaint was not alleging that Benihana was actually using the tip-pool funds to pay actual wages owed — such as a minimum wage obligation — Wilkes could not substitute “market wages” here with those kind of wages bound by statute.
“In contract to minimum wage, prevailing market wages are not wages ‘due an employee,’” the judge said. “And as discussed above, no court has held as much.”
He also rejected Wilkes’ argument that the tip-pooling policy was nonetheless unlawful because it lowered servers’ payroll expenses, saying plenty of jobs give employers leeway to pay their workers less because they will be receiving tips.
“At a minimum, accepting this argument would call into question almost all tip pools, if not the practice of tipping itself,” the court held.
Wilkes initially filed his complaint in September on behalf of himself and current and former Benihana servers within the last four years who were subject to the tip-pooling policy, which he framed as unreasonable and inequitable.
In an exhibit attached to his most recent complaint, the ex-worker said this policy caused him, in one instance at the end of his shift, to pocket only $45 of the roughly $100 tips he earned after parts were distributed to busers, chefs and the bartender.
But the judge, while saying the chain’s policy “may not be perfect,” pointed out that Wilkes did not ever allege he was left without any tips at the end of a shift as the result of this system.
“Absent this sort of obvious unfairness, the court is in no better position than Benihana to dictate how the policy should operate, and attempting to do so would implicate serious policy concerns,” he said.
Representatives for the parties didn’t immediately return requests for comment Wednesday.
Wilkes is represented by Kyle M. Van Dyke of Van Dyke Law.
Benihana is represented by Alison Jacqueline Cubre, Dawn S. Fonseca, Robert L. Zaletel and Michael E. Brewer of Littler Mendelson PC.
The case is Wilkes v. Benihana Inc., case number 3:16-cv-02219, in the U.S. District Court for the Southern District of California.
--Editing by Brian Baresch.
The national chain was facing claims of conversion and violation of California’s labor code and the Private Attorneys General Act by the time the third amended complaint was dismissed after other claims previously had been trimmed, including failure to maintain and provide accurate wage statements.
In dismissing the complaint with prejudice without leave to amend for a fourth time, U.S. District Judge Jeffrey T. Miller said ex-Benihana server Brendan Wilkes failed to state a claim for the remaining counts, saying the chain’s tip-pooling policy was not unduly unreasonable and that the court was reluctant to impose an alternative policy for a commercial enterprise.
“While plaintiff may have preferred to keep a larger share of tips, an employer has wide latitude in devising tip-pooling policies to meet its business needs,” the judge said. “In the end, although the policy may not be perfect, plaintiff does not allege that it has ever left him without tips after a shift, and it does not require servers to go into their own pocket for contributions.”
Wilkes, who worked as a server at the Benihana restaurant in Carlsbad, California, for about a year, found fault with the chain's policy of divvying up the mandatory tip pool at the end of the night to pay all workers, including chefs, bartenders and busers. Wilkes claimed this policy amounted to an unlawful “tip credit” scheme in which the chain was using tips to subsidize submarket wages paid to nonservers, leaving few tips left over for servers.
Wilkes claimed that the tip pooling system, which is not prohibited in California, was being used as a “de facto tip credit” scheme to offset market wages for nonservers who wouldn't ordinarily receive tips.
But the judge noted that since the complaint was not alleging that Benihana was actually using the tip-pool funds to pay actual wages owed — such as a minimum wage obligation — Wilkes could not substitute “market wages” here with those kind of wages bound by statute.
“In contract to minimum wage, prevailing market wages are not wages ‘due an employee,’” the judge said. “And as discussed above, no court has held as much.”
He also rejected Wilkes’ argument that the tip-pooling policy was nonetheless unlawful because it lowered servers’ payroll expenses, saying plenty of jobs give employers leeway to pay their workers less because they will be receiving tips.
“At a minimum, accepting this argument would call into question almost all tip pools, if not the practice of tipping itself,” the court held.
Wilkes initially filed his complaint in September on behalf of himself and current and former Benihana servers within the last four years who were subject to the tip-pooling policy, which he framed as unreasonable and inequitable.
In an exhibit attached to his most recent complaint, the ex-worker said this policy caused him, in one instance at the end of his shift, to pocket only $45 of the roughly $100 tips he earned after parts were distributed to busers, chefs and the bartender.
But the judge, while saying the chain’s policy “may not be perfect,” pointed out that Wilkes did not ever allege he was left without any tips at the end of a shift as the result of this system.
“Absent this sort of obvious unfairness, the court is in no better position than Benihana to dictate how the policy should operate, and attempting to do so would implicate serious policy concerns,” he said.
Representatives for the parties didn’t immediately return requests for comment Wednesday.
Wilkes is represented by Kyle M. Van Dyke of Van Dyke Law.
Benihana is represented by Alison Jacqueline Cubre, Dawn S. Fonseca, Robert L. Zaletel and Michael E. Brewer of Littler Mendelson PC.
The case is Wilkes v. Benihana Inc., case number 3:16-cv-02219, in the U.S. District Court for the Southern District of California.
--Editing by Brian Baresch.
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