NYC Restaurant Serendipity 3 to Pay $975K to Settle Tip Claims

Serendipity 3, an Upper East Side restaurant in New York City, will pay $975,000 to settle claims it underpaid tipped employees.

Thirty-three former servers and bussers will share the payout. Individual distributions will range from $376.73 to $52,469.54, with an average amount of about $20,300 per employee. The parties say in the agreement that they settled as a compromise to avoid continued litigation.

Serendipity 3 Inc. allegedly pooled tips and gave some of the tips to employees, including ice cream scoopers, who weren’t legally eligible to participate in the pool. A business is allowed to pay a lower minimum wage to employees who earn gratuities if the tips sufficiently raise the workers’ pay to at least the standard minimum wage. There are other conditions that apply when an employer takes advantage of a tip credit, such as a requirement that tips may be pooled only among employees who normally receive them.

The Labor Department is in the process of rolling back rules put into place during the Obama administration that said the prohibition on pooling tips with workers who don’t usually receive them applies even when the business doesn’t take a tip credit. The agency now says it exceeded its authority under the Fair Labor Standards Act when it wrote rules addressing a situation where an employer doesn’t take a tip credit.

The settlement is a fair and reasonable resolution of the lawsuit, Judge Alison J. Nathan of the U.S. District Court for the Southern District of New York said. She based her conclusion in part on the servers’ and bussers’ estimate that their maximum potential recovery would be $1,105,734.95 if they were to win at trial.

Louis Pechman, Vivianna Morales, and Gregory Slotnick with Pechman Law Group PLLC in New York represented the workers.

William Cusack and Justin Guilfoyle with Wilson, Elser, Moskowitz, Edelman & Dicker LLP in New York and Kenneth Small in New York represented Serendipity 3.

The case is Velandia v. Serendipity 3, Inc., 2018 BL 248592, S.D.N.Y., No. 16-cv-01799, final settlement approval 7/12/18.