Simon Bloom, Bloom Sugarman, Atlanta.
Simon Bloom, Bloom Sugarman, Atlanta. (Joseph Wong)

An arbitrator ruled against two South Carolina waitresses who filed a putative class action to stop the owner of three California Dreaming restaurants from making them share their tips with drink preparers who don’t interact with customers.

The waitresses’ complaint said that, because they are paid below the $7.25 minimum wage and management is given a “tip credit” under the Fair Labor Standards Act, forcing them to contribute to a “tip pool” shared with the service bartenders violates the law.

The plaintiffs, Brittany Bradley and Tamia Corbett, were paid the federal minimum wage of $2.13 an hour for tipped employees.

Atlanta attorney Simon Bloom, who represents CentraArchy Restaurant Management Co., said FLSA regulations are clear that, while cooks, dishwashers and other “back of the house” staff are not eligible for inclusion in the tip pool, service bartenders are specifically included. The company operates three California Dreaming restaurants in South Carolina.

“We knew from the start that this was largely a lawyer-manufactured lawsuit,” said Bloom, who defended the case with Bloom Sugarman colleagues Frederick “Skip” Sugarman, Shannan Oliver and Adam Nugent.

“There was no real injury being suffered by anyone,” Bloom said. “Everybody was already making more than minimum wage, the servers appreciate having a service bartender because it improves their service. Everybody won.”

Bloom said that, until the conditionally certified class of 200 current and former California Dreaming employees was decertified, his client faced “potentially millions of dollars” in damages that would have accrued from the years of back-pay adjustment sought by the plaintiffs.

The plaintiffs are represented by South Carolina lawyers Badge Humphries of Lewis Babcock in Sullivan’s Island, Irmo solo Todd Ellis, and James Griffin and Margaret Fox of Columbia’s Griffin & Davis. None were available for comment.

The case started in 2015 when Bradley and Corbett filed an FSLA collective action complaint in U.S. District Court in South Carolina. Under that law, class participants must opt in to join an action, and Bloom said the lawyers hosted “beer and pizza parties at restaurants” and invited employees to join the action.

“The threshold for conditionally certifying a class is very low under the FLSA,” Bloom explained.

The plaintiffs signed arbitration agreements when they were hired, and the case was referred to Kristine Cato at the American Arbitration Association, who decertified the class earlier this year.

Bloom said that the plaintiffs based their arguments on a 2011 decision in a Texas federal court, Barrera v. MTC, Inc. The judge ruled the determining factor for whether a service bartenders are eligible for a tip pool is whether they provide “visible customer service and interaction.”

“This test exists nowhere in the regulations, the statute or agency guidance,” Bloom said. “It is that thin reed of nonbinding, nonauthoritative and not even instructive precedent that these plaintiffs’ lawyers built their entire case on.”

The defense moved for summary judgment, which was denied. But in an Aug. 23 order, Cato ruled the FSLA, Labor Department guidelines and even the plaintiffs’ own testimony made clear the service bartenders were “front of the house” employees.

The key questions were whether service bartenders in the industry are customarily and regularly tipped, and whether those at California Dreaming had the opportunity to be tipped, Cato wrote.

The evidence and testimony from multiple expert witnesses with years of experience in the business—”albeit defendant’s witnesses,” Cato noted—indicated service bartenders regularly participate in tip pools.

The plaintiffs, whose experience only included work at California Dreaming, offered no rebuttal testimony, Cato wrote. Their only witness with any relevant experience concurred with the defense expert.

As to whether California Dreaming service bartenders had an opportunity to interact with customers and be tipped, Cato wrote the plaintiffs “argue strongly and provide testimony that there was limited to no customer interaction” and that “there was limited, if any, customer visibility based on the location of the service bar and its proximity to the dining room.”

While the plaintiffs “may not be totally incorrect,” she wrote, “the entire analysis cannot focus on customer interaction and customer visibility alone, which is in large part judicially created.”

The DOL handbook provides the clearest guidance for determining the issue, and it has “explicitly informed restaurant owners that they may include service bartenders in tip pools,” Cato wrote.

Cato’s ruling assessed an $83,700 arbitration fee, which Bloom said his client must pay.

Bloom said the plaintiffs may try to challenge the order in the district court, but it’s unlikely to prevail.

“They can try to make up some nonsense basis to object to the conformation of the award, but there are very limited grounds for the denial of confirmation under the Federal Arbitration Act,” he said. “That doesn’t mean they won’t try it.”