Servers allege California Dreaming ran illegal tip pool at S.C. locations

Charleston, SC - September 19, 2015 (Alex Holt / Post & Courier)

A collective action complaint filed against three California Dreaming restaurants in South Carolina, including the Charleston location, may help clarify whether service bartenders are entitled to receive tips.

Two women who worked as servers at a California Dreaming in Columbia contend that the chain illegally required its floor staff to share tips with drink preparers stationed in the kitchen. Under federal law, a tip pool is invalid if any portion of it is distributed to workers who do not “customarily and regularly receive tips,” such as managers, cooks and janitors.

Because an employer forfeits the right to claim a tip credit if its pooling arrangement violates U.S. Department of Labor standards, the plaintiffs are asking the company to recalculate their last four years’ of pay at the minimum hourly wage of $7.25, instead of the tipped rate of $2.13 an hour, in addition to compensating them for damages. That amounts to $10.24 for every hour worked.

“For a server, it would be a significant sum of money,” says plantiffs’ attorney Badge Humphries of Lewis Babcock & Griffin’s Sullivan’s Island office. Humphries last month mailed a notice to 1400 current and former tipped employees of California Dreaming, asking them to join the case.

California Dreaming did not respond to a message seeking comment.

While the courts have reiterated that dishwashers and chefs are barred from participating in tip pools, the status of service bartenders – a class which exists solely in large or high-end restaurants – is less clear.

In Charleston, Humphries explains, “if you sit by the bar, then the bartender you see is going to make your drinks.” But if you’re seated at a table in the main dining room and ask for a daiquiri, “that’s when the service bartender makes your drink.”

A U.S. District Court in Texas five years ago wrestled with the question after a tipped employee of Mi Tierra in San Antonio argued she was owed full minimum wage because the Tex-Mex restaurant split its tip pool between bussers, counter servers, hosts and service bartenders. The court’s analysis centered on the visibility of restaurant employees and the nature of their interactions with customers. (At Mi Tierra, unlike at California Dreaming, the service bartender was positioned in sight of the public.)

After examining potentially analogous positions such as bar back and sushi chef, and considering that customers might find margarita-mixing more entertaining than enchilada-rolling, the court allowed the case to continue. It however did not issue a ruling on how service bartenders should be classified.

In an unrelated matter, California Dreaming last year was cited by the Department of Labor for improperly exempting assistant managers from receiving overtime pay. “Procedures were immediately changed to ensure that we were in compliance with all Department of Labor requirements,” CentraArchy Chief Financial Officer Julie Smith told The Post and Courier after the investigation was disclosed.

The current collective action was moved from federal court to arbitration because all California Dreaming employees are required to sign an arbitration agreement upon hiring. Humphries says that’s an increasingly common stipulation in the restaurant industry.