11th U.S. Circuit Court of Appeals: Miami Restaurant Service Charges Are Not Tips
TALLAHASSEE (CBSMiami/NSF) - Ruling against a group of restaurant workers, a federal appeals court Friday said service charges tacked onto diners' bills at a Miami steakhouse are not tips.
A three-judge panel of the 11th U.S. Circuit Court of Appeals upheld a lower-court decision that backed Nusr-Et Steakhouse, which distributed money from the mandatory 18 percent service charges to employees to cover the restaurant's minimum- and overtime-wage obligations, according to Friday's ruling.
Restaurant workers who filed the lawsuit contended the service charges were tips and, as a result, could not be used to meet the obligations under the federal Fair Labor Standards Act.
"If the charge is a tip, the FLSA (Fair Labor Standards Act) barred Nusret from using that money to satisfy its minimum and overtime wage obligations to the employees," said the ruling, referring to Nusret Miami, LLC, which does business as the steakhouse.
"But if the charge is not a tip, Nusret could use it to meet its wage obligations under the FLSA, and the district court properly granted summary judgment."
The ruling said the steakhouse paid employees substantially more than the state's minimum wage and concluded that the service-charge money was part of the workers' "regular rate of pay."
It pointed to a U.S. Department of Labor regulation that said tips are matters "determined solely" by customers.
"By this measure, Nusret's service charge is not a tip," said the 21-page ruling, written by Judge Elizabeth Branch and joined by Judges Britt Grant and Andrew Brasher.
"Critically, whether and how much to pay are not 'determined solely by the customer.' Indeed, those decisions are not determined by the customer at all."
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