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Surly Case Challenges Tip Pooling Mandate

A key decision in a case involving tip pooling returns to Hennepin County District Court this fall, after a judge ruled in favor in July of a former employee who filed a lawsuit against Surly Brewing Company. The case centers on the sharing or pooling of tips at Surly. 

At a bar or restaurant, tipped employees who deal directly with the guests may opt to divide the tips at the end of the night with non-direct service staff, including cooks, bus staff, hosts, barbacks and food runners.

Ensuring everyone gets a share of tips is seen as promoting working as a team. But unless the direct service workers agree to share, it’s not legal in Minnesota.

A summary judgment handed down July 12 stated that Surly’s tip pooling policy violated the Minnesota Fair Labor Standards Act. No date has been set for the jury trial this fall, which will focus on actual damages owed to former Surly bartender James Russell Conlon and other Surly workers who joined in the class action case. About 100 people are involved.

Hennepin County District Court Judge Karen A. Janisch sided with Conlon earlier this year by certifying the case as a class action. Members of the class are defined as all people who have worked shifts as bartenders and servers from the date Surly opened its beer hall. The court held that Surly’s tip-pool system violated the Fair Labor Standards Act since it began, and that it is still in violation.

Attorney Steve Andrew Smith of the Nichols Kastner law firm handled the case for Conlon and other workers. Smith said improper tip pooling likely goes on more often than the public realizes. 

“It’s a practice that isn’t that uncommon. There’s lots of ways to violate the law,” said Smith. He believes many people don’t challenge improper tip pooling because they may be waiting tables as a summer or short-term job. Or they don’t understand the law. 

“Most claims may be modest to pursue. But everyone needs to understand the law and how it works,” Smith said.

In the Surly case, Smith believes damages could exceed seven figures. “This case should shine a light on illegal practices and make employers think twice,” he said.

Surly issued a statement after the July ruling: "Surly generally does not comment on pending legal matters.  Nevertheless, Surly believes that it has fully complied with all state and federal laws regarding the administrative distribution of tips received by employees under Minnesota’s tip-pooling statute. We note that there is no claim that Surly withheld any tips from its employees, and in fact, it has not. Surly is working with its legal counsel to resolve this matter quickly and in a manner that is fair to Surly’s employees."

Tip pooling laws differ from state to state. Smith said Minnesota’s law is much more restrictive than other states’ laws. 

Lead plaintiff Conlon filed the lawsuit in early 2016, on behalf of himself and other bartenders and servers. Minnesota law forbids employers from requiring that direct-service workers participate in tip pools. Employees can set up such pools on their own, but that has to be done without participation or coercion on the part of an employer.

Conlon contended that the brewery violated the rights of bartenders and servers by requiring the tip pool, and the sharing of tips with indirect-service workers such as hosts and bus staff. The lawsuit stated that Surly designed and implemented a mandatory tip pool in December 2014. The pool rules were changed from time to time, which generated disagreement, according to court documents. In 2015 the bartenders considered opting out but that raised concerns from management.

Conlon began working at Surly in November 2014. He was fired in December 2015, after Surly set up a meeting to discuss the tip pool. Surly argued that Conlon was terminated for aggressive behavior; he is claiming wrongful termination.

Smith said improper tip pooling practices can result in employers paying indirect-service workers less, because they know the tips can be shared. “Workers have rights under the fair Labor Standards Act,” he said.

A check with the Minnesota Department of Labor indicates that while state officials are aware of the Surly court dispute, they have not seen an uptick in questions or complaints about tip pooling since the July ruling. 

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