The labor advocacy group One Fair Wage is challenging the legality of the tip credit by suing Olive Garden parent Darden Restaurant for using the wage concession where permitted by law.
The action alleges that Darden routinely violates federal discrimination protections by using the credit, which allows employers to pay servers and bartenders a wage lower than the legally mandated minimum if their tips bring them up to that level. In jurisdictions that use the federal compensation standard, full-service restaurants can pay its tipped employees as little as $2.13 an hour, instead of $7.25.
The suit asks that Darden's use of the tip credit be declared unlawful and that the restaurant operator be directed to compensate One Fair Wage for all the time it's spent on trying to help Darden's employees.
The heart of the suit is an allegation that Darden’s use of the tip credit is “the direct cause of or at least a motivating factor in” the sexual harassment of servers.
“A key reason for this is that the subminimum wage puts great pressure on tipped employees to have the customers, rather than Darden, pay employees their legally-required wages,” the suit states. “This, in turn, means that managers have an incentive to ignore, indulge, or even encourage sexual harassment, including requiring or encouraging employees to flirt or dress suggestively.”
In addition, the action says the use of a tip credit can lead to servers of color earning less than their white counterparts. It argues that tipping allows the customer to decide what a server takes home and that some of those guests may leave smaller gratuities for members of racial minorities.
“They often bring conscious and unconscious racial and other biases with them when they eat out,” the suit asserts. “Customer decisions about whether and how much to tip have resulted in employees of color being paid meaningfully less than white employees.
Darden is culpable because it allows those prejudices to come into play, One Fair Wage argues.
The suit does not accuse the casual-dining giant of being biased against tipped employees who are female or persons of color. But, it asserts, evidence shows those individuals have been subjected to harassment or prejudice, a violation of their rights under Title VII of the Civil Rights Act of 1964. That landmark piece of legislation regards statistical evidence of disparate treatment as proof of discrimination, regardless of the transgressor’s motivation or attitudes.
“To be clear, tipping itself is not the problem,” the suit states. “Rather, Darden’s tipping policy, which does nothing to mitigate customers’ tip choices, is the problem.”
Darden objected that it’s being used as a proxy in One Fair Wage’s crusade against the tip credit. “To be clear, this is not about Darden,” the operator of more than 1,800 full-service restaurants said in a statement. “The complaint makes clear that their objections are with federal and state wage laws – not with our practices.
“We have zero tolerance for any form of harassment or discrimination in our restaurants, and we have strong policies in place to ensure our team members are treated with respect and feel safe and valued at work.”
Because the lawsuit contends that the tip credit is fundamentally a violation of federal anti-discrimination law, it takes aim at the use of the credit per se. Many chains have a policy similar to Darden's on use of the tip credit. A victory by One Fair Wage could have widespread implications for all of casual dining.
One Fair Wage makes the extraordinary request in its filing that it be compensated for its efforts to help Darden's employees.
"Because of Darden’s policies, One Fair Wage spends tens of thousands of dollars annually, if not more, in salary and consultant payments, employees’ benefits, office supplies, digital engagement fees, and other expenses, as well as hundreds of hours of staff and consultant time, all of which could have been spent on other matters but for Darden maintaining its unlawful policies.
One Fair Wage tried unsuccessfully to end the tip credit through legislation earlier this year. A provision discontinuing the break for employers was included in the most recent COVID relief bill, but was dropped from the measure before it reached the Senate because of parliamentary rules.
Forty-three states permit the use of the tip credit.