Restaurant Lawyer David Jordan on Tip Pools and Illegal Immigration

Categories: Local Spotlight

David Jordan, restaurant lawyer.jpg
David Jordan is a partner in the Houston office of Littler Mendelson, an international law firm specializing in labor and employment law. Before he was a lawyer, Jordan worked in the restaurant industry for several years: flipping burgers at Burger King when he was in high school; working in TCBY's corporate offices after college; managing and owning an El Chico franchise; and managing several Applebee's restaurants. As a lawyer, he remains heavily involved with the restaurant industry; between a third and two-thirds of his work is restaurant-related, and he is a frequent commentator on restaurant-related labor issues.

EOW: I've often heard of unhappy lawyers opening a restaurant or wine bar, but you're the first person I've met who owned a restaurant and then decided to become a lawyer. How did that happen?

DJ: After ten years I had seen it all: from Tex-Mex to yogurt franchises to fast-casual concepts and family restaurants. But the hardest thing at all of these places was managing employees -some of these restaurants had more than a hundred employees. There would always be these fascinating legal issues, but it was difficult for me, as a manager, to appreciate them. So I thought I'd give law school a try. I took the LSAT, applied to one law school [the University of Oklahoma], and when I got accepted that was that. Now I help restaurants navigate the things I could never figure out as a manager, and the risks are much bigger now.

EOW: What are the main legal issues facing restaurants?

DJ: There's a wide variety: workplace discrimination and harassment, wage issues relating to the Fair Labor Standards Act, and immigration. Restaurants also have to address premises liability - for instance, when someone slips and falls on restaurant property - and food safety regulations, but those latter two aren't what I do. Finally, there are intellectual property issues, such as copyright, confidentiality and trade secrets (like an employee stealing recipes). And of course there are everyday disputes: between franchisees and franchisors, and between restaurants and realtors, landlords or banks. As restaurants historically have lower success rates than other businesses, they often find themselves in legal difficulty.

EOW: Does every restaurant need a lawyer?

DJ: Yes. Most restaurants find themselves in legal trouble at some point, and it's typically because they've never partnered with a lawyer who knows the industry. Restaurant owners often spend all their money on capital equipment and paying down debt, and don't make provisions to limit their potential liability on labor, immigration and safety issues. Smaller operators are also less likely to have sufficient insurance, which means that a labor problem may become a situation in which if they lose a lawsuit, they're out of business. And a qualified lawyer would only need a couple hours to address issues like a restaurant's procedures for paying wages and sharing tips.

EOW: How can restaurants get it wrong in terms of wages and requiring employees to share tips?

DJ: Federal law sets the minimum hourly wage for most employees at $7.25, but restaurants can reduce that minimum wage all the way down to $2.13 for employees who regularly and customarily receive tips, such as bartenders, busboys and waiters. That difference of $5.12 is called the "tip credit." Restaurants that reduce an employee's minimum wage in this fashion must ensure that the employee makes enough in tips to get back up to $7.25 an hour for the pay period. This part isn't a big deal; most waiters and bartenders make far more than minimum wage when you include tips, as all they have to do is make about five dollars in tips in an hour.

Restaurants must tell the employee they're taking the tip credit, and they need to allow the employee to keep all of her tips, unless the tips are part of a valid tip pool. What's a valid tip pool? Employers can require an employee to share her tips with other regularly and customarily tipped employees, so long as the tipped employee keeps enough to cover the minimum wage requirements. But an employer cannot require a tipped employee to share tips with employees who do not regularly and customarily receive tips (e.g., dishwashers, janitors, and chefs). What makes this dangerous for restaurants - and such a hot issue for restaurant lawyers - is that if restaurants mess up on tip pooling, the damages they have to pay employees are much larger than the amount of the contribution.

Here's an example. Say every waiter, at the end of her shift, has to put in a dollar for the chef or the manager. This is illegal. And if the restaurant is sued, it won't be required to pay back each waiter a dollar for each shift, but rather the full tip credit of $5.12 for each hour worked during each waiter's shift. If the shift is five hours long, that's a payment of more than $25 per shift, and when you're talking about dozens of waiters working hundreds of shifts over a period of months or years, that's a huge payday. Something similar happened with Gravitas a couple years ago.

[In 2008, a federal court held that Gravitas's policy of requiring waitstaff to contribute $1 per shift to a "breakage" fund (to replace broken stemware) was illegal, and Gravitas had to pay back the waitstaff the entire tip credit it had taken for every hour during every shift in question.]

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Montrosian
Montrosian

I love that an employment attorney who specializes in the restaurant industry selects restaurants based on whether they will let his 2 and 5 year old's "play". Wow. Those restaurants and customers must love having his kids under foot.

Bruce R
Bruce R

Montrosian, what is your point? He likes to go to restaurants where both he and his kids can unwind. Nothing wrong with that.

The Man
The Man

I think his point is that some people don't watch their children in restaurants and expect the staff to baby sit them.  Fortunately these type of people are in the minority.

Heights Fan
Heights Fan

This guy is a bottom feeder, looking to exploit the hard working, independently run restaurants in town that can't afford a high dollar attorney to keep an eye on all business operations for them. Why would you feature him?That being said, the Tycer breakage fee had to meet its end. Heard it had been in place since the early days of Aries.

Matthew Dresden
Matthew Dresden

You're welcome to your own opinion, but I think you misunderstand David's line of work. He represents restaurants and restaurant owners, and in virtually all cases defends them from lawsuits. He does not file lawsuits against restaurants (and was not involved in the Gravitas case). A certain type of restaurant -- small, independently run, or what have you -- may think they can't afford to hire him, but in no way would I characterize that as exploitation.

And I wouldn't automatically characterize a lawyer who represents waiters, busboys, etc, and sues restaurants for violating wage and labor laws as a "bottom feeder," regardless of who she sues. Why should independently run restaurants get a pass from following employment laws? Sure, it's possible for lawyers to file nuisance lawsuits. It's also possible for restaurants to take advantage of their waitstaff.

Kyle
Kyle

I did not know that about Gravitas. Always good to have another reason to dislike Tycer.

The Man
The Man

What a d-bag comment. 

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