To give a few dollars or not—that is the question asked by satisfied patrons when exiting their favorite gourmet eatery and awaiting the “complimentary” curbside arrival of their car. Unbeknownst to the customer, both the restaurant and the valet service could have significant and potentially expensive legal obligations to the valet driver. Indeed, those same valet drivers are now increasingly filing complaints with departments of labor and in court to recover wages.

It is common in the hospitality industry for employees to share tips with other employees. In many instances, the practice of sharing tips is required as a condition of employment. Although common, not all practices comply with applicable law, but a successful, legal tip pooling arrangement can help control labor costs.

In 2001, a federal court in Tennessee hit Treetop Enterprises, Inc., a Waffle House franchisee, with a damage award over $2.8 million (plus prejudgment interest and attorneys fees) in a lawsuit claiming that Treetop had misclassified its managers as exempt from overtime compensation under the Fair Labor Standards Act (FLSA). While shocking at the time, it proved to be the precursor to a cottage industry of copycat lawsuits -- with companies such as Starbucks® and others being hit with big damage awards or agreeing to large settlements.