Cafe Gratitude Says It's Closing Over a Tip Pooling Lawsuit. Is Pooling Tips Even Legal?

Categories: Ask the Critic
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The blowup of the Cafe Gratitude empire, yesterday's biggest food-news story, was ostensibly brought on by the owners' response to several lawsuits that waiters have filed over the restaurants' tip-pooling policies. In recent months, several nationally renowned New York restaurants have also been hit with lawsuits over tip pooling.

Is tip pooling even legal in California? SFoodie posed that question to several San Francisco attorneys specializing in employment law.

The answer, in brief, is yes. Matt Marca, a labor employment lawyer with the San Francisco office of Littler, which is representing Cafe Gratitude,* told SFoodie that California state courts first ruled in 1990 that tip pooling is legal among staff who provide direct service to customers -- waiters, bussers, bartenders. 

In 2009, the California Appellate Court ruled in Etheridge v. Reins International that the pool could be expanded to include anyone in the chain of service. "The court took a pragmatic look at service," Marca explains. "The restaurant doesn't know everything that goes into a tip that a customer gives for service. When you talk to a maitre d' and he's unpleasant, maybe you leave less of a tip. Maybe he's nice to you and you leave a better tip. If you sat down, and your waiter was wonderful but the food was horrible, maybe you left less of a tip, and the kitchen's the issue. Maybe your plate arrives and the food is wonderful and the service is great, but the plate had leftover food from the last meal on it, so you're not going to leave as good a tip. That's the dishwasher's fault." 

Furthermore, management has a right to gather the tips and distribute them to staff. That's because, according to Marca, employers are allowed to exercise control over the process to make sure all employees are fairly treated. "Why should the busboy be at the whim of a waiter who happens to be greedy and doesn't want to tip?" Marca says. "On the flip side, if there is a lawsuit over tip pooling, the employer is the one who will be sued." The employer should therefore be keeping record of tips coming in and tips paid out. 

Who is not allowed to participate in tip pooling arrangements? Management.

Stephanie Bornstein, who teaches employment and labor law at UC Hastings, explained to SFoodie in an email, "In general, owners and their 'agents,' including managers or supervisors who can hire and fire other employees or who supervise, direct, or control other employees, cannot share in the pooled tips that were intended for the waitstaff."

There is one way under California state law that restaurants can exert more control over whom tips are distributed: by adding a service charge to the bill -- say, Chez Panisse's 17% -- which the state treats differently than a tip. "To be considered a gratuity under the law, the tip must be 'over and above' what is owed to the business for the food, drink, and services rendered." Whether such a service charge is enough to protect a restaurant from being sued for improperly distributing pooled tips is unknown.

*Clarification: This post has been updated to reflect the fact that Mr. Marca is representing Cafe Gratitude.

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Scott Le Grand
Scott Le Grand

I love eating at CG.  It's not cheap.  It's clearly not the workplace for everyone, and it seems like they've run afoul of employment law.  But to see it close on what seems like relatively minor offenses is a real shame. When I've hated working someplace, I've solved the problem by voting with my feet and working somewhere else.  And the amount of hate pouring down on these guys for whatever transpired astounds me - you'd think the Engelharts were former AIG  or Enron executives.

That said, as a raw food dilettante, I know from personal experience that the prep and acquisition is expensive and labor-intensive.  CG seems to be the only business entity to have centralized production sufficiently to be profitable. If that meant cutting wages and benefits in order to buy a farm, then that says more about the underlying business model than anything else to me (ya know google bought a farm and a coffee plantation to bring down costs, does that alone make them evil too?).  If this niche of the market were crazily profitable, they'd have intense competition instead of a veritable graveyard of failed competitors and contemporaries.

Dharma's in Santa Cruz has been in business for decades.  They even weathered a lawsuit from Mc Donalds over their original name (Mc Dharma's).  Their vegetarian food isn't as good or as healthy as CG's, but they've managed to survive.  I hope CG survives in some way, perhaps with more conventional management?

Guest
Guest

If Jonathan Kauffman just posted great things about Cafe' Gratitude no one would read it. Everyone wants to  be the next TMZ with a large audience = $$$$$$$..... so casually slandering others becomes acceptable and necessary. 

Guest
Guest

Most cafe gratitude employees posting on this subject say it was great to work at Cafe' Gratitude and contradict the propaganda being spread by bloggers. The majority of the people who worked at Cafe Gratitude  are the only votes that count in my book. 

The hysterical  for-profit blogs or media who want to sell a juicy story or  the bitter ex workers out for their pound of flesh or the worst of the lot, the anti-cult-cultists  who fear Landmark and smear it at every opportunity, and who flood these message boards,  are not voices I assign any value to. 

s b
s b

Actually, to be precise, the original tip lawsuit was amended and expanded to include allegations that the company does not allow proper break periods.  Other violations of law are alleged in the amended complaint, which is available free to download at the SF Superior Court's website.  Instead of peppering the comments with a jargon-laced homily, perhaps it would be worthwhile to consider that both sides are entitled to their day in court. If the plaintiff is wrong, CG will be vindicated.  If the owners are wrong, the plaintiffs will recover what they seek.  But trying to put a negative spin on people trying to enforce their rights in the workplace is unfair.  And claiming that a chain of stores is closing because of one lawsuit is really suspect.

Bruce Bullard
Bruce Bullard

The whole notion of tipping is outdated.  Europeans don't  tip.  Yes--the whole adage"how hard is it to bring food to the table, and write down an order" is well--truthful.

Being a server is a menial job.  I was never intended to be a career.  If you made poor choicesin life and ended up serving patrons--It was your fault.  I know you had big plans, but sometimes things don't work out as planned, or if you were once an a attractive young ladyand though people were tipping you because of your illustrious personality--wake up.That time of your life is gone.  Mom and dad were right.

The only person who should ever get a tip is an educated cook--not a foreign hack, but a person who spent a few years ay a culinary school.

I've never liked tipping period.  It's even more annoying when some middle aged man ,or women feels like they earned the tip.  Most of the time the server has been at the restaurant way too long.  Your irritating, and your customers know all you tip groveling techniques.

If I ever opened up a restaurant it would be self serve.  If you can't bring a plate to your table--you need to exercise.  An exception would be made for the handicapped.

And 20% on top of usually overpriced food is a joke. 

Kelleygurl
Kelleygurl

Who says it was never intended to be a career? Who do you think you are? Serving food in many instances is a science and a talent. It's fine if you prefer to eat at Homestyle Buffet when you go out, but don't take it out on people who are good at what they do. I prefer to eat at a place which has a knowledgeable waitstaff, that knows how to describe a plate that makes my mouth water and knows how to pair the perfect wine.  If you don't want to tip, don't accept services but either way you live in the US of A and here. . . we tip.

Mary
Mary

Bruce, it's incredibly difficult to be a good server.   You have to be able to multi-task under extremely stressful situation (think quarterback coolness), have an excellent memory, manage difficult customers and kitchen staff, and queue the orders properly (to minimize the kitchen workload and the customers' wait time). They are the sale people and the face of the restaurant.  A good server can increase revenue by a huge percentage.  Tip pooling is legal and people not related directly with service can get a portion of the tips now, but it's my understanding the server should still get the majority of the tip.     

Portia
Portia

Bruce - Have you ever worked at food service?

It sounds from your response like a) you've never worked in food service, and b) you really should just order in, because you're not interested in a table service experience. Which is fine. But back off other people wanting that and being willing to pay for it.

Yes - Europeans don't generally tip. But they do pay their servers more than minimum wage, and "service" is conceived of differently. Which is fine if that's what you want.

And 'foreign hack'? Please. You're just trying to sheath your bigotry in nice language. Not all food knowledge comes out of a culinary academy. How do you think California would function without all of its 'foreign hacks'?

So go ahead, Bruce. Don't tip. Be a racist asshole. Open your own restaurant and see how that goes.

C.R.E.A.M.
C.R.E.A.M.

Bruce. I am a server and I bet I make more money than you.

Petalperfections
Petalperfections

Try this one on for size. Years ago Cafe Gratitude's managers received $16- $18/hr.  and paid vacations. Then the paid vacations went away because the company could no longer afford it. We opened another restaurant. After years of service many of the managers voiced we'd like to be paid more. The company said they couldn't afford it. They opened another restaurant. And then they came up with a solution. Our titles changed, we were called shift leaders, our hourly wage dropped to $11-$13/ hr. and we were thrown in the tip pool (thus taking more from our servers). Now we made more. They opened another restaurant.  The vote they speak of when "we the workers voted to tip pool" went like this. Keep things the way they are or lose your benefits and reduce your wages. Not a very powerful choice. Eventually, I got fed up and quit. In the beginning CG was an amazing place to work, but as we expanded many employees felt less like we were being taken care of. They always taught us to live in integrity. Of coarse no one does it all the time. The lesson was when it was broken, take responsibility and clean it up. I see now their version of cleaning it up is blaming the plaintiffs, the lawyers and closing down. Who is responsible for putting over 200 employees out of work? It is a choice they are making to close. They will expand in LA, where they don't tip pool. That location sells $12k a day and yes like every other restaurant, it pays it's back of the house minimum wage. Apparently, Sacred Commerce is practiced differently in Southern California.

Bitha
Bitha

"TIP POOLING"

OH YOU MEAN REDISTRIBUTION OF WEALTH

Let Them Eat Vegan Cake
Let Them Eat Vegan Cake

“If you stick a knife in my back nine inches and pull it out six inches, there’s no progress. If you pull it all the way out, that’s not progress. The progress is healing the wound that the…blow made. And they haven’t even begun to pull the knife out much less try to…heal the wound. They won’t even admit the knife is there.”- Malcolm X in 1964 interview

Lucythebat
Lucythebat

I too am an actual employee of Gratitude. It has been an amazingly supportive place to work. There are many things I love about it. And I support those who are in the lawsuit. There still are no others.

Server w/ a different opinion
Server w/ a different opinion

I too am a current employee with Cafe Gratitude. I've always loved my managers, my coworkers, the owners, the customers and the community. However, I have a different perspective. We share our tips with the people who work in our central kitchen, an off site location. At one time we shared our tips with people who worked in the retail department. So that means if you ordered something on line, our tips were being shared with those who boxed your items. I too, think there should be less discrepancy between the back of the house and the front, but this should be the responsibility of the employers. If they want the kitchen staff to make more than they should make it a priority to pay them more. We are always told we don't make any money because our ingredients are so expensive. Well now 80% of our produce is coming from a farm we own. We are buying it from ourselves! How can it be so expensive? There is no "pile of hidden cash" because the profits we've made have been spent on opening other locations and buying a farm. Meanwhile managers used to get paid vacations, now they don't. Managers used to be salaried, now there are no managers. We made them shift leaders, lowered their wages and through them in the tip pool (all in the name of being able to pay them more). The way I see it is the servers tips are being used to subsidize the rest of our employees wages. We've opened new locations in LA, however they do not follow our current Northern California policies of tip pooling. Why not, if what we do is so legal? It was really hard to see us practice one version of Sacred Commerce up here while seeing a different version down there. All Northern Callifornia locations are going to be closed, meanwhile we are making plans of mass expanssion in Los Angeles & Santa Barbara. If this was Target that was being sued by it's employees everyone would be screaming for workers rights! Where is our taking responsibility for what we've created. We collectively have put our own employees out of work. It is not the fault of those who filed the suit or greedy lawyers.

sledcake
sledcake

Watch:GF will stay opne at the last minute. They will do as 2 Veg restaurants in Chicago ( poorly run) did this year. Cried wolf , gained a surge in sales and press pity then stayed open. Oops , one did finally shutter.Many veg restaurant owners have good intentions but no experience in the food business which is a seriously treacherous one in these economic times. I like that they are vegan but couldn't deal with the  word and games and submission to dine there after one visit. Raising ORGANIC produce you take a bigger fail hit at harvest than conventional. Raw foods are very labor intensive. Not a good biz model in my humble.

Adrienne
Adrienne

I started going to the first cafe two weeks after it opened and have been going every day (literally, with the exception of traveling) since.  It is my second home.  Matthew has called me their "best customer" a few times.  I share this history, because I think it speaks to the very educated assessment I have made of the organization.   When people call it a cult it blows my mind.  The whole damn idea is BE YOU.  The central opportunity, if you CHOOSE to participate, is to share your most authentic gifts and infuse them with love.  That's it.  Not in a manner that Matthew & Terces dictate but in YOUR way.  You have to be looking the other direction to miss that point.  Nobody is kidnapping you and taking you to (god forbid) a Landmark meeting or forcing you to order with the affirmation.  If you say, "I'd like the tacos" nobody is going to stand staring at you burning incense and banging a gong until you correct yourself and sing kumbaya.  The staff just wants you to feel as good and as YOU as possible inside those walls.  I have plenty of skeptic and "don't believe the hype" running through my veins - I think with the amount of exposure I've had to the organization I would have found the bullshit.  Honestly, when I think of Cafe Gratitude words like inclusion, acceptance, fun, democracy, support, openness, unconditional love, opportunity, authenticity, generosity, high standards, employee empowerment, leadership, flexibility, community and FAIRNESS easily come to mind.  The food and the culture have saved my life.  That isn't an exaggeration.  I was very sick when I first walked in those doors.  Today, I have a beautiful life and a functioning body and mind.  The formula went like this: Sick me - add Cafe Gratitude = WELL ME (notice the formula doesn't include the word brainwash).  I have attended most of their workshops multiple times and with the practical tools I have learned there - I found my career, healed chronic physical illness that at times had me bed-ridden and grown truly successful relationships of every kind...including with myself.  Again, no brainwash just the tools and nutrition to clear my fog and heal my body.It's the real deal.  I'm here to tell you, with eyes wide-open, that the lawsuits and gossip are nonsense. Their restaurants are where people come to eat the highest quality food and engage with their highest selves....or not...that's my point...what you want to create at Cafe Gratitude is what you will create at Cafe Gratitude.  It breaks my heart to think some multi-year members of the staff drove the whole thing off a cliff expecting to land in pile of cash.  And I have come to a place of peace about that and them.  This is the beginning of a newly inspired adventure for all of us.  I choose to be grateful that we have a new opportunity to grow.  You've got my heart and my support always and forever, Cafe Gratitude. I love you.

Cynthia
Cynthia

Why didn't you mention that Marca is Cafe Gratitude's lawyer?

Jonathan Kauffman
Jonathan Kauffman

Marca is not Cafe Gratitude's lawyer, as far as I know. I contacted two employment lawyers to find out the basics of what is legal in California, not to comment specifically on the Cafe Gratitude case.

Homeskillet27
Homeskillet27

Another article mentions that café gratitude is being represented by littler mendelsohn. If Marca is an employer of littler he would hardly be unbiased in his opinions.

Jonathan Kauffman
Jonathan Kauffman

Well, what do you know? Mr. Marca has since contacted SFoodie to inform us that he is the lawyer representing Cafe Gratitude, which he didn't before or during our conversation. Of all the labor lawyers in all the towns...

Onlyislove
Onlyislove

What most people forgot or don't even know is Cafe Gratitude was built by Matthew and Terces Engelhart around a board game they had written and produced, "The Abounding River". This is the consciousness board game of the 21 century. 

They went on a raw food retreat and loved the healing experience of the food so much they decided to build a raw organic cafe around their board game.  It was an experiment knowing full well that the restaurant business was a gamble for any type cuisine but organic and raw food even more challenging.  

Matthew and Terces saw this as a great way to heal people and help transform their lives.

Working at Cafe Gratitude is about the privilege of service. Making the experience of anyone who walks through that door beyond their expectations. 

Well, the experiment was an overnight success and all kinds of people wanted to franchise their cafe. 

Cafe Gratitude is not a restaurant. Cafe Grattitude is a school of transformation. There could be a lot of money made there if you ran it like a business, cut back on all the staff in about another 10 years after they pay off all they have into all these locations."

Don't ever mistake abundance for cash..... not with these people.  

There is no way they are going to spend any money in a legal battle.  They would rather give it to the poor. 

The only thing they are guilty of is being too successful too fast.  It's a lot to handle and financing is to keep up with this kind of growth is the burden they took on to keep it all going.

I have seen their operation at the main kitchen and a few of the Cafe's and I remember thinking..' how could they possible be making any money?' 'Everyone is always laughingaround here?'. 

I know Matthew and Terces are really being pulled out now to do even more in service.

We  need leaders/healers like them to get us through the next decade.

This whole story is really something to watch. This is a story of growing not shrinking.

These two have got what it takes and I know we all wish them the best of LOVE.

The staff will be stronger and more grateful now than ever. They may end up owners.Who knows what will happen. Nothing to panic over that is for sure.

Cheyenne Barr
Cheyenne Barr

As an actual employee of Cafe Gratitude, having worked for this company for five years, and having experienced the practices and mission of Cafe Gratitude in it's actually I would love to be heard.  Let me assure all readers that Cafe Gratitude is of the highest integrity and has the highest generosity of any employer I have ever worked for and is the most compassionate and truly wonderful company that I have ever come across.Cafe Gratitude is a radical company that actually cares about all workers and created a context for all employees to share tips-- a revolutionary way to distribute the wealth that recognizes the work and impact of all workers in the kitchen.  Because every item on the menu is made from scratch, that means that your pizza bread actually took 48 hours to make, not kidding.  That's 48 hours of someone in the kitchen's time.  The tips are shared to recognize that.  I am grateful for a company that addresses the inequalities in the mainstream restaurant structures, and dared to break the norm on several accounts, to HELP employees and to revolutionize food, workers rights, and capitalism.  I fully stand behind the owners as they are nothing but the kindest, most generous people, and they have put their money, their hearts, their land on the line.  So much so that they don't even have a home on their property and live in a yurt.  THERE IS NO PILE OF MONEY SITTING ANYWHERE.  Every dollar went either to employees, our training, our health, our wages or farmers and local businesses with their integrous groundbreaking products, or they lowered the prices to make the food more affordable.  There is no profit, nothing hiding.  The owners have given this community their all.

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