11th Cir. OKs 'Salt Bae' restaurant's compensation scheme

Dive Brief:

Nusr-et Miami — an upscale steakhouse in Miami owned by celebrity chef Nusret Gokce, also known as "Salt Bae" — did not violate the Fair Labor Standards Act by using an 18% "service charge" added to customers' bills to help meet its minimum and overtime wage obligations, the 11th Circuit Court of Appeals ruled March 18 in Compere v. Nusret Miami (No. 20-12422 (11th Cir. March 18, 2022)).
Filed by a total of 24 tipped employees at Nusr-et, the class-action lawsuit alleged that from Nov. 1, 2017, through Jan. 18, 2019, the restaurant "paid them less than the required federal minimum and overtime wages and forced them to participate in an illegal tip pool with non-tipped employees." The plaintiffs' case argued that the 18% service charge should be treated as a tip.
The 11th Circuit determined that the service charge was not a tip because it was mandatory; the payment was not a "gift" and the amount was not, as the legal definition of "tip" states, "determined solely by the customer."

Dive Insight:

While perhaps not the most prominent of wage and hour complaints, tipping compliance issues crop up occasionally and — like many policies emerging from executive agencies — are subject to the winds of political change.

For example, the Biden administration's Department of Labor reissued "80/20" rules late last year, revising its Fair Labor Standards Act tip interpretation. Under the rule, which went into effect in December and is currently being challenged by the National Restaurant Association's Restaurant Law Center, tipped employees' tasks that support tip-producing work — but do not directly generate tips — must constitute fewer than 20% of the employees' workweek hours.

The rule's reestablishment was a reversal of a Trump administration action withdrawing a version of the rule. Its use has been a compliance-intensive attempt by federal regulators to ensure tipped employees are able to sufficiently benefit from tips, given their typically low wages.

The ‘Salt Bae' case was comparatively straightforward, resting largely on how the law defines tips. The plaintiffs attempted to argue that "a service charge is a tip unless an employer ‘include[s] the service charges in their gross receipts for tax purposes,'" but the 11th Circuit concluded that Nusr-et's tax forms were "irrelevant" to the case.