Michael's Genuine Agrees to $475,000 Class-Action Settlement

Michael Schwartz and his restaurant holding company have settled a class-action lawsuit that alleged one of his restaurants funneled tip money to managers, sommeliers, and kitchen employees, leaving servers to be paid below minimum wage.

The company 130 NE 40th Street LLC, which bears the address of Schwartz’s flagship Michael’s Genuine Food & Drink, agreed late last month to pay up to $475,000, according to federal court records. Sixty employees claimed they were shorted anywhere from $91.20 to more than $20,000. A schedule of claims within the court records places the total amount at $221,014.45.

“During my employment at Michael’s Genuine restaurant, I regularly worked more than 40 hours per week but was paid below minimum overtime rate for tipped employees,” Michael Moseman, who worked at the restaurant for nearly seven years, said in a sworn affidavit. He claimed $12,671.93 in unpaid tips or wages.

In another statement, Bryan Ohlsen claimed “tips collected from servers were taken by the house or owners for inventory breakage or replacement.”

Neither Schwartz nor his attorney Russell Marc Landy of Damian & Valori LLP could be reached for comment. Schwartz’s director of operations, Charles Bell, was also named in the suit. 

Under the Fair Labor Standards Act, Florida companies can reduce the amount they pay tipped employees by a maximum of $3.02 as long as the employee still receives the state-mandated minimum wage for both regular and overtime work. In 2014, that meant a minimum $7.93 for hourly pay and $11.895 anything thereafter, according to the lawsuit.

“Everybody who was part of this action was happy with the way it worked out,” said Robert Brock, who represented the employees. “The business is still running, and hopefully there won’t be any more issues.”

Such class-action suits over improper handling of tips are not uncommon. In 2012, Italian superchef and Eataly kingpin Mario Batali agreed to pay $5.25 million to settle a 2-year-old lawsuit.

Late last year, Houlihan’s owner A.C.E. Restaurant Group was sued by the U.S. Department of Labor for withholding servers’ tips to pay untipped staff.

In light of Shake Shack founder Danny Meyer's and Miami's own Choices Café’s experiments to abolish tipping and pay more across the board, you might take heart from the details in these lawsuits. By spreading servers’ tips across their staffs, restaurant owners are acknowledging the need to balance salaries.

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