Gratuitous Behavior

Here's a tip for restaurateurs: Before you cut into your waitstaff's wages, check state regulations.

Let's say you earn a decent salary--on paper, at least. But each payday, your employer deducts a couple hundred bucks to tip your secretary, the payroll director and the guy who cleans your office. After all, your employer explains, those people are your support staff--you couldn't get your job done without them--and they deserve to benefit from those earnings of yours that they help make possible, even if they already receive paychecks of their own. In addition, your boss says, he's going to deduct another hundred or so to cover the cost of running the business.

How long do you think you'd put up with that?
Former waiter Gary Rymer says he had put up with it for seven months when he finally left Budapest Bistro this past March. Until then, he alleges in a lawsuit filed two weeks ago in Denver County Court's Small Claims Division, Budapest Bistro owner Rudi Hellvig kept between 20 to 30 percent of his tips. "Every night when the tips were added up, Rudi took out a percentage of our earnings," Rymer says. "At first he said it was to tip out the ma”tre d', the busboy and the bartender, but I pointed out that I was usually my own busboy and bartender. Then he told me that he was taking money out of my tips to pay for the 2 to 4 percent processing fees that credit-card companies charge restaurants for the privilege of using their company. Basically, I was getting punished for having customers who used credit cards to pay for their meals. But I really needed the job at the time, and so I felt like I had to put up with it, even though I kept mentioning it to Rudi."

The 44-year-old Rymer began working for the Hellvigs in August, when Rudi and Anna Hellvig opened their Budapest Bistro at 1585 South Pearl Street. "When I started, Rudi said something vague about tipping out the busboys and such, but it was not specific," says Rymer. "He certainly didn't tell me it would be 30 percent, and there was no mention made of the fact that the money would be taken out even if I did my own busing and bartending, which I did a lot of. I've been in the restaurant business for twenty years, and I've come across this before, but not usually so blatantly a case of someone just trying to keep money for themselves."

The Hellvigs say they've been handling tips this way since they started their first restaurant, Csardas, back in 1983. "Whoever gives you a service, that person has to be paid, even if it's me, the owner," Hellvig says. "If someone's doing cappuccinos for you, then that person has to be paid. If someone's picking up dishes from your table, that person has to be paid." Of course, the people performing those services make minimum wage--now $5.15 an hour--or more, compared to the waitstaff's $2.02 an hour. "But you know that waiters and waitresses make way more than minimum wage," Hellvig adds. "And it is only right that they share with the people who help them."

Hellvig says he decided to make the sharing official after he noticed that waitstaff members were stingy with their tips. "When we first had Csardas, I knew that there were waiters making more than $100 a night, and they were only handing over a couple of dollars to these people who were knocking themselves out to provide a service for them," he explains. "So we said that it wasn't fair and started to pool all the tips, withdrawing a percentage to give to the support staff. In all these years, no one has complained except Gary."

And Rymer complained not just to the Hellvigs, but to the Colorado Department of Labor and Employment's Division of Labor Standards, where the case was assigned to compliance investigator Dorothy Lovett. Rymer says Lovett told him that while the Hellvigs' practice of withholding tips didn't break any federal or state laws per se, it could be a violation of state labor department standards. "Dorothy Lovett said that the department couldn't really do anything to the restaurant because it wasn't a huge deal," he adds, "but that I'd probably be successful in small claims." So he filed suit there, claiming that the Hellvigs owe him $1,500 in back pay, an amount he says represents 30 percent of the tips he earned over seven months. (Lovett is on vacation, but her participation in the investigation is confirmed by her boss.)

In the process of her investigation, Lovett contacted the Hellvigs and ordered them to turn over documentation of their wage payment, which they did. "We didn't do anything wrong," Anna Hellvig says. "I do the bookkeeping, and I know for a fact that we did nothing wrong." Both Hellvigs deny that they ever withheld tip money to pay credit-card processing fees. "That's a lie," says Rudi. "Gary is making that up. But we still take out 20 percent. It used to be 30 percent, but we lowered it around Christmas. I know my rights, and it is within our rights to take money for the host, the busboys and the bartender."

That's not entirely true, says Mary Blue, director of the state's Division of Labor Standards. According to Minimum Wage Order Number 21--a state labor department document that regulates wages, hours, working conditions and procedures for employers and employees in the retail, food and beverage, health and medical, service, and construction industries--employers are allowed to force employees "to share or allocate such tips or gratuities on a pre-established basis among other employees of said business who customarily and regularly receive tips." The key words there, Blue says, are "employees...who customarily and regularly receive tips." In other words, she explains, "employers can only force their employees to hand over money from their own tips to tip other employees if those other employees normally receive tips. And I think it's quite arguable whether busboys or hosts customarily and regularly receive tips."

The vagueness of the regulations regarding tipping has been a source of contention for some time in the restaurant industry. In an attempt to clarify the rules, a few weeks ago the labor department proposed an update, Minimum Wage Order Number 22, which adds the words "from customers" to make it clearer just who "customarily and regularly" receives tips, and also includes wording specifically prohibiting the withholding of credit-card processing fees from employees' tips. The department is holding hearings on the proposal this week; if it is approved, it will go into effect on August 1.

That won't be soon enough to suit the restaurant industry. Last September, Colorado Restaurant Association president Pete Meersman sent a letter to the state's Division of Labor Standards requesting a clarification of its regulations, particularly with regard to federal standards. While the wording on tip withholding in connection with tipping other employees is similar on both state and federal levels, he points out, the federal Fair Labor Standards Act does not address the matter of withholding tips to pay credit-card processing fees. And while the current state wage order doesn't address the issue, either, in 1997 the Colorado labor department ruled that it was a violation of regulations for a restaurant to withhold a portion of tips to cover credit-card costs. "When I wrote the letter to the state labor department, it was not that I approved of the withholding," Meersman explains. "It's that CRA members were asking us whether they were allowed to do it, and I wanted a clear explanation of what the rules were. In fact, I don't agree with the practice, I don't think it's fair, but I do think that it's difficult to maintain consistency when the federal and state codes don't match. I just don't see why it has to be so complicated."

And in fact, the response Meersman received from Department of Labor and Employment executive director Jon Numair was much more straightforward than the department's regulations. "I believe that when customers leave tips for employees on credit cards, they do so believing that they are rewarding the employees for the level of services rendered," Numair wrote. "Reducing the amount of tips without informing customers of the reductions defeats the spirit of rewarding employees in appreciation of the services they received."

The proposed changes to the wage order are designed to make the rules clearer. But some ambiguity is inevitable, Blue says. "When you're a government agency, you don't want to make the rules so rigid that you have problems with people fitting into them," she explains. "This regulation only started getting attention a few years ago, when more out-of-state restaurants were coming in. In New York it's okay to take money out of credit-card tips, but in other states it's not. And in some states, especially New York, busboys regularly receive tips from customers. So these large restaurant companies have been confused about where they're allowed to do what, and we needed to address that."

Which is why adding the words "from customers" should make at least part of the regulation clearer. "That way, restaurants from other states will understand that we mean that since busboys in Colorado don't normally get tips from customers, then the restaurant can't take out money from waiters' tips to give to the busboys," Blue says. "Now if the waiters want to give up some of their tips, that's fine."

When a restaurant is found in violation of tipping regulations, Blue says, "the restaurant immediately gives up its right to take what's called the 'tip credit.' That's the $3.13 that makes up the difference between minimum wage and the $2.02 restaurants are allowed to pay tipped employees. So the restaurant would have to pay that difference to the waitstaff." Still, she admits her department's ability to enforce the rules is limited. Since they receive 14,000 phone calls a month regarding wage violations in a variety of fields, state labor officials concentrate their resources on frying the big fish.

"We simply don't have the budget to go after every one of these cases ourselves," Blue says. "Labor department employees are usually available to testify about department policy at small-claims court, which is really the best avenue for individuals. We really only like to take a specific business to court if there's a larger issue that affects a multitude of employees. For us to get involved, it would have to be a case like a large restaurant chain taking money out of everyone's tips for credit-card fees."

And such a case isn't likely to crop up anytime soon. "That just wouldn't make any sense," says the CRA's Meersman. "I think that as this gets more attention and restaurants realize that some of the rules have changed or are being more closely paid attention to, then this might make the difference in where an employee decides to work. And since I don't know of any restaurant in this state right now that is fully staffed, this could have an impact. Why would anyone work somewhere that they lose part of their tips for credit cards or for busboys when there's so much work available out there?"

There may be work out there, but Gary Rymer isn't interested. "Since the Department of Labor can't pursue all the restaurants that could break this regulation," he says, "then it seems to me it's a matter of, 'I own the business, and I can do whatever I want.' It must be nice to grab some extra cash for yourself off someone else's work."

But it won't be Rymer's work. He's gotten out of the restaurant business altogether--in favor of a field where the money lies not in breaking the rules, but in interpreting them. He recently earned his paralegal associate's degree.

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