Unlawful Deductions Applies to Tips, Minnesota Supreme Court Rules

The Minnesota Supreme Court recently ruled in favor of restaurant workers, finding that employers cannot force employees to use their tips to pay for restaurant shortages, walkouts or unsigned credit card receipts.

The Minnesota Supreme Court recently ruled in favor of restaurant workers, finding that employers cannot force employees to use their tips to pay for restaurant shortages, walkouts or unsigned credit card receipts. In Karl v. Uptown Drink, approximately 750 servers, bartenders, and security guards (“the employees”) brought a class action against their employers, Uptown Drink, LLC and other entertainment corporations, alleging “unlawful deductions.” The employees filed a class action lawsuit alleging violations of the Minnesota Fair Labor Standards Act (“MFLSA”) claiming they were required to use their tips to pay for register shortages, customer walkouts, as well as unsigned credit-card receipts. The matter proceeded to trial.

After evidence was presented at trial, the employees moved for a directed verdict which was denied by the district court. The district court concluded that while there was evidence that the employers required employees to pay for shortages, the employees would be required to prove that these payments made their income fall before statutory minimum wage in order to be a violation. Both sides appealed to the court of appeals and the court affirmed, finding that the employees were not entitled to recover because they failed to present evidence showing that their wages ever fell below minimum wage.

The Minnesota Supreme Court reversed this decision and determined that gratuities constitute wages, and employers are not permitted to require employees to use their tips to pay for any register shortages, walkouts, or unsigned credit card receipts.  The Minnesota Supreme Court also found that the employees did not have to prove their wages fell below minimum wage to succeed. Instead, the Court found that Minnesota law prohibits an employer from making a deduction for a claimed indebtedness unless the employee voluntarily authorizes the employer in writing to make the deduction, or unless the employee is held liable in court for the loss or indebtedness.

If you are a server working for a franchise, corporation or other large hospitality group, knowing the law can help you protect your rights and ensure that your employer is in compliance with the law. Our firm is experienced with wage and hour disputes and class action lawsuits. Please contact us with any questions or to review your case and potential claim.