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Banquet waiters at Manhattan’s Rainbow Room are not entitled to a portion of a service charge even if customers believe the fee is for tips, an appeals court ruled Tuesday. The unanimous ruling from the Appellate Division, 1st Department, partially dismissed a $10 million lawsuit filed by non-union waiters against the Cipriani family, who operate the Rainbow Room and another banquet hall, Cipriani 42nd Street. The waiters, who worked for $20 an hour, claimed they also should receive a cut of a 22 percent service charge under Labor Law � 196-d, which governs the distribution of tips. The Ciprianis pay union waiters under $5 an hour, but the waiters receive 14 percent of the 22 percent service charge, making their actual wages much higher than $20 an hour. In Bynog v. Cipriani Group Inc., 1777, the 1st Department disagreed with the non-union waiters, saying the Ciprianis’ “service charge” was “not in the nature of a voluntary gratuity presented by the customer in recognition of the waiter’s service … notwithstanding that the customer might believe that the charge is meant to be so distributed.” However, the court did reinstate one aspect of the waiters’ lawsuit that had been dismissed by Manhattan Supreme Court Justice Ira Gammerman, who found in March that the waiters were independent contractors. “The action should not have been dismissed on the ground that plaintiffs were not employees of respondents, where respondents required plaintiffs to adhere to strict guidelines on how and when to serve food and set tables, wear uniforms … and perform the same functions” as union waiters. The 1st Department’s findings reinstate the waiters’ claim under Labor Law � 191 and � 198 alleging late payment of wages and seeking fines, attorney fees and costs. Perhaps more important, that aspect of the ruling was a policy victory for the office of New York Attorney General Eliot L. Spitzer, which had argued that Gammerman’s ruling, if upheld, could undermine labor laws and make businesses less accountable for temporary employees. Marshall E. Bernstein of Robinson Brog Leinwand Greene Genovese & Gluck, a lawyer for the Ciprianis, described the ruling as “an important victory for the catering industry of New York.” As for the court’s remarks about the waiters being employees of the Ciprianis rather than independent contractors, Bernstein said, “The impact of that on us and outsourcing providers in general is not clear yet.” The waiters’ attorney, Robert K. Erlanger, of counsel at Dwyer & Brennan, said the ruling “runs contrary to the very clear language of [� 196-d], which does not distinguish between mandatory and voluntary charges.” BROAD LANGUAGE Erlanger said that broad language in the ruling distinguishing voluntary tips from mandatory service charges could go beyond caterers and apply to restaurants, which often impose a service charge for large parties. John D’Ercole of Robinson Brog disagreed. “We think [the ruling] would hardly apply to the restaurant industry broadly,” he said. M. Patricia Smith, chief of the labor bureau at the attorney general’s office, agreed, saying she did not “see that there is any basis in the statute” for keeping tips from waiters when restaurants charge mandatory fees for large parties. Robert Lillpopp, a spokesman for the New York State Department of Labor, said the office had not yet received the ruling and could not comment on its implications. Erlanger said that under Labor Law �� 191 and 198, his clients could seek a penalty equal to 25 percent of their total wages because they were not paid within two weeks, as employees must be under the law. He also said he would seek leave to appeal the 1st Department’s ruling to the state’s high court, the Court of Appeals. Both Erlanger and Bernstein said the bulk of the money sought by the waiters centered on the dispute over tips, not the late payment of wages. Justices Richard T. Andrias, David B. Saxe, John T. Buckley and Alfred D. Lerner concurred on the ruling. Christy L. Reuter of Robinson Brog argued the case for the Ciprianis.

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