Money-Grub ‘Tip’ Suits Driving Eateries Out of Business
A top restaurateur is throwing in the apron, saying he’s done with New York City because a wave of vicious lawsuits, coupled with draconian state regulations, threatens to cripple the industry.
Eateries have paid out close to $30 million in settlements over wage and tip complaints in the past few years — and that’s just from suits filed by one Manhattan lawyer, Daniel Maimon Kirschenbaum.
The city’s biggest names, including Nobu, Jean Georges, Sparks and Mesa Grill, have forked over millions, and more restaurants are on the hook. The ‘21’ Club reached a tentative $2 million settlement last week in a suit that alleged it stiffed workers on overtime pay and did not properly distribute a service charge to banquet staff.
“Money-hungry lawyers, through frivolous lawsuits, are shaking down the very foundation of Manhattan’s restaurant industry,” fumed Joe Bastianich, co-owner of Eataly, Del Posto and Babbo.
Bastianich said the litigation — he has been sued twice — has left such a bitter taste that he’s done with setting up new ventures in New York.
“We opened Eataly and put 700 jobs in the New York economy. Since then we haven’t opened another restaurant in New York, nor will we,” Bastianich told The Post. “We opened three other restaurants, in California and Connecticut, worth 1,000 jobs that could have been here in New York. Someone in Albany needs to understand the agenda, what this is really costing the greatest restaurant city in the world.”
New wage rules from the state Labor Department, which took effect in January, regulated tip distribution for the first time. For restaurant owners who lose their cases in court, the damages are now much harsher.
“You’re forced to settle. Why go to trial and risk a $5 million settlement if you can settle for a million and a half?” Bastianich said.
It seems as if none of the city’s eatery elite has been immune from litigation. Keith McNally settled for $1.48 million over claims at Pastis and Balthazar, and Laurent Tourondel spent $925,000 to end suits at his BLT empire.
The legal battles have led to some desperate moves.
Celebrity chef Geoffrey Zakarian filed for bankruptcy earlier this year, a move his publicist said at the time was because of the “enormous costs of defending a class-action lawsuit by former employees” of Country, a now-shuttered restaurant.
Chris Cannon suddenly closed his highly rated Alto and Convivio restaurants last winter. Alto had been sued over an allegation the waitstaff was forced to illegally share tips with the general manager and other ineligible workers. He settled last month for $300,000.
The avalanche began five years ago as lawyers filed class-action cases drawing together busboys, waiters and other staff, sometimes by the hundreds. The more plaintiffs, the larger the potential settlement, with lawyers typically taking one-third of the payout.
“I invented this business,” said Kirschenbaum, a Manhattan lawyer who has launched more than 100 suits in federal court, including one against Bastianich and his partner Mario Batali.
The class-action suit claims the restaurant denied overtime to workers, didn’t pay a required premium for long shifts, and illegally kept a portion of tips.
Another suit, by a different lawyer, charges Bastianich and his partners failed to pay waiters and others minimum wage and overtime at Del Posto, where the seven-course tasting menu is $145. It also claims that the restaurant owners “unlawfully retain gratuities added to banquet bills.”
“This is an industry where people thought they were getting away with stuff,” Kirschenbaum said. “They alter time sheets. They get service employees to share their tips with kitchen staff to help pay their salary in the back of the restaurant.
“Restaurants have been getting away with this for a long time.”
But Bastianich maintains that workers in New York eateries are paid the “best restaurant wages in the world.”
“Plaintiffs are waiters and busboys making 70, 80, $100,000 a year,” he said.
The issues stem from a competitive industry that deals largely in cash and where rules regarding salaries and tip distribution are complicated, said lawyer Louis Pechman, who won the largest settlement against a single restaurant — a $3.15 million payment from Sparks steakhouse in 2009.
“The majority of restaurants on any given street in New York are still paying people the wrong way,” said Pechman, who sometimes teams up with Kirschenbaum.
Pechman runs a Web site called waiterpay.com that details restaurant pay rules and provides space for potential litigants to contact his firm.
Stephen Hans, a Long Island City-based lawyer who defends many small restaurants, said predatory lawyers even look for plaintiffs by advertising in El Diario and other ethnic newspapers.
Restaurants are often liable because they didn’t keep accurate records. He said one Queens pizzeria owner came to him with tears running down his face.
“He wasn’t keeping proper time records, so he didn’t have a defense,” Hans said. “He had to pay damages. It just killed him.”
Carolyn Diane Richmond, who has defended Nobu, Tribeca Grill and other top eateries, said the suits are spreading to mom-and-pop operations.
“It’s been a recipe for disaster for many small operators,” Richmond said. “There’s a perception, particularly in this city, that restaurateurs are sitting on gold mines.”
Restaurant owners often settle because they fear a worst-case scenario where they’re found to have violated the law, Richmond said.
The new state regulations spell out who’s in the tip pool, including waiters, busboys, bartenders and others as long as they regularly serve customers.
Typically, cash and credit-card tips are amassed and distributed to eligible staff based on a formula, with some workers getting a greater share.
If an unauthorized employee, such as a maitre d’, shares just once in the tip pool, the restaurant risks losing its so-called tip credit. That is the regulation that allows owners to pay tipped employees less than the minimum wage.
In New York, waitstaff can be paid $5 an hour, instead of $7.25, with the $2.25 difference considered the credit.
But a restaurant that is found to have violated the law, and loses the tip credit, must return the $2.25 an hour to every employee who worked during the period of the violation, for every shift they worked. This can add up to thousands of worker-hours.
“You’re talking potentially millions of dollars,” Richmond said.
The settlements, which usually come with no admission of wrongdoing, often don’t end up enriching waiters and busboys much.
In the case of the $2.5 million Nobu settlement, $833,333 went to Kirschenbaum’s and other firms. The 200 or so workers who sued got an average payment of $3,300 each.
Moneybags
So is this the real reason Levana’s closed down?
$ Yarmulke pic $
Money-grubbing Jew, in other words. This is thinly veiled antisemitism.
Disgusted
What a chilul hashem!!!
It just reenforces the sterotype about money hungry Jews and lawyers !!
Iv owned restaurants in the past and it’s one of the hardest biz to run and operate!! The margins are tiny!! And here comes the dirty Jew lawyers who only see dollar symbols!!
Maybe he should sue his family for back pay for the ex employees at levanas!!
You embarrass us all
Yep… I wonder how he would know about these practices? Go sue your parents Mr. Kirschenbaum. You do us no favors with these kind of shenanigans. We all bear the price for what another religiously observant jew does… You ought to be ashamed of yourself
Monsieur
Maimon, Your awesome!
Me
Wow, all your comments make it seem as if he is the one conducing illegal activity. It’s amazing how the Post (commissioned by Bastianich) was able to skew the facts to make you feel that the lawyer helping the waiters who’s wages are being stolen from them by wealthy restaurateurs is actually the one in the wrong here. I can guarantee you this is actually a kiddush hashem in the eyes of all those restaurant workers being awarded their due pay through these class actions.
sick comments
maybe you can read the article and notice that he’s right! they’re stealing money from their workers, he’s retreiving their hard earned money. the papers will always paint jews as money grubbing.
let’s hear what you do for a living before you attack another jew? oh right, you dont work, you collect food stamps and welfare. maybe that’s how the jews get a bad reputation.
sick comments
maybe you can read the article and notice that he’s right! they’re stealing money from their workers, he’s retreiving their hard earned money. the papers will always paint jews as money grubbing.
let’s hear what you do for a living before you attack another jew? oh right, you dont work, you collect food stamps and welfare. maybe that’s how the jews get a bad reputation.
So disgusted
Chillul Hashem. NOthing to be proud of. Yet another New York Lawyer destroying and destroying.
Lawyers are terrible till you need one
Yeah these Lawyers are terrible till you need one.. Its the Restaurant owners that are crooks, you just have to see the large settlements they paid they are not in poverty just ripping off employees.
This is getting interesting!
Quick witted response from actual journalists. A must read (if you prefer to get the story without vicious anti-semitic undertones):
http://m.gawker.com/5843667…
Apparently there is more than one side to a story, as any sophisticated media consumer would know.
Mendy Hecht
Classic lose-lose situation:
Lawyer who happens to be visibly Jewish takes on a corrupt niche industry, he’s a “dirty money-hungry Jew lawyer” and causes chilul Hashem. Lawyer who happens to be visibly Jewish does not take on a corrupt niche industry because he’s afraid of causing a chilul Hashem, the niche industry continues to get away with its corruption. (Solution: non-Jewish lawyer?)
Yanky
The restaurant owners complain that they are being put out of business, but never apologize for stealing money from their employees. Whose really at fault for their restaurants closing?
Perhaps the reason so many people feel on this website feel so slighted by Mr. Kirschenbaum’s enforcement of the law is because they themselves conduct such illegal and extortionate activity. There are plenty of owners right here in Crown Heights that treat their workers, especially non-Jewish and/or undocumented workers, immorally and in violation of wage and hour and workplace safety laws. If only Mr. Kirschenbaum would take on the Jewish restauranteurs …
MANAGER OF RESTAURANT
ITS A CHILUL HASHEM:
Shocked that frum ppl would steep so low
To all of you defending this:
The folks working at these restaurants had no problem working under these conditions. Case in point: They did for years. Mr. Kirschenbaum discovered a legal loophole to make millions on the backs of honorable people who had been doing nothing illegal. While he does not directly pursue clients with a phone call, he and others advertise in places where they know they will get the business – essentially an end run around otherwise illegal activity.
This has nothing to do with giving poor people a fair shake. The plaintiffs in these cases do not make a lot on this. I would not be surprised to learn that he “invented this business” based on inside knowledge of how the restaurant business works – given that his family are in that business. Either way it’s shameful and unethical.
Say what you will about those who defend child killers. As sleazy as they are at least you can say they are serving a legitimate function i.e. providing someone with their constitutionally enshrined right to a defense. But these guys are just shakedown artists with no regard for decent hardworking people and who would rather destroy a business leaving many of those same lower income people whose interests they purport to defend unemployed.
The chill hashem is in us
The chilul hashem is in us if we can so quickly turn on a fellow yid. What an ungrateful and negative community we have become. We resent and bad mouth anyone who “makes it” out there. If someone does well in business we curse them out for becoming modern or cutting their beard or leaving yeshiva, not becomin shluchim and the list goes on. Noone ever brings up that these are the people supporting all our moisdos. Here’s a chasidisher yungrrman, with the full garb, prpudly using his jewish name, and in other websites is being praised for his civil rights work, whatever it is, but in our circles we call him a chillul hashem because of a piece of tabloid style lashon hora? We don’t give a benefit of the doubt. No. we judge even more harshly. This individual is one of our commumitys good ones. We should stand behind him with pride and protect him from slurs like those printed above. How does it happen that the accusations fun unzerer are even more hateful than those from outside. When did we become such a negative and mean group of neigbors?no wonder there’s an op-ed every day about problems in crown heights. Lack of Ahavas Yisrael destroyed the bias hamikdosh. Lack of Ahavas Yisrael is burning down our shechuna into ashes. My point is not an answer to only this article more than any other article that attacks people, but I see it so much lately that I can’t keep it to myself any more. I ask you my friends and neighbors, fellow community members- when did we become such a mean and negative group of people.
not nice
Is this guy a Lubavitcher?
Yanky
To #15:
Mr. Kirschenbaum didn’t find a “legal loophole” to go after these employers. He is enforcing the law established by the federal government in the Fair Labor Standards Act and by the State of New York. Not only isn’t what he’s doing something backhanded, it is affirmatively encouraged by the law. In many cases, the law grants an automatic 33% in attorney fees in order to encourage attorneys to take otherwise low value cases.
Yakov Kirschenbaum
BS“D
If the morons commenting here would actually pay attention to the article, they would see that all the article says is that Maimi K. is suing the restaurant owners for mistreating their workers. The owners are not denying the accusations and are not all even defending themselves. They’re just complaining that they’re being brought to to justice for their terrible misdeeds. That a Jew is fighting successfully on behalf of mistreated workers is a tremendous Kiddush Hashem.”Tzedek tzedek tirdoif”
On the other hand a Jew lacking the intelligence (or desire) to understand a simple article and displaying hatred to a fellow chossid is tremendous chillul Hashem.
Meir
Yakov,
Well said!
Did you realize these guys attacking Maimon K are not here to defend their case, they just throw trash and run away, they are cowards!
May we all have a good year full of love, peace and harmony!
Reply To Yakov Kirschenbaum
Stop B S ing your way through life. These workers were happy to work for many years at these locations until this kirshenbam started advertising in the el diario Spanish paper looking for people that want to make a “cash Payout” by suing their boss.
this guy has no shame
to # 21:
from what u write it seems like ur a 10 year old that cant understand or read a simple article it seems like u have smthng personal against this man siriously where r ur brains??????? just stop criticizing put ur feelings aside and read the article with patience and u will c that he is just doing his job. (get a life)
Yanky
To # 21:
Your writing demonstrates a lack of common sense and awareness, employment practices, and the law. It takes a lot of guts for workers to come forward and sue their employer for stealing their wages. Employers tend to retaliate by firing their employees or acting hostilely toward those employees who remain in their employ after winning a settlement. The workers who receive only $3,300 in settlements have barely enough to get by on, especially if they were without income for an extended period because they were fired by their employer. They certainly don’t have enough to retire on.
Reply To Yakov Kirschenbaum
I would love to know the reason Levana restaurant closed its doors suddenly, without giving any notice to its employees or patrons !
Now i understand Rabbi Hecht from Park Slope
To Yanky
No one is disputing that the law is being enforced. This does not in any way contradict the fact that this law firm has found a legal loophole and is exploiting it for all it’s worth on the backs of poor workers who end up with 3 grans and no employment
Paralegal
To 25:
What makes you think these people end up with 3k and no employment? many of them make much more than that and keep their jobs. There is no reason for them to be unemployed for joining a class action lawsuit and it’s illegal for their bosses to terminate them in retaliation. If they only make 3k it’s because that’s all they were owed. You will never know the satisfaction of handing a 10 or 15k check to a waiter who has been working his tuchis off and getting paid bubkes. Kirschenbaum and his colleagues are actually helping people in a significant way.
Do you consider waiters getting paid for all their hours worked a legal loophole? Is that how you feel about your job too? Many of these restaurant owners actually adjust their employees’ hours to reflect significantly less hours worked and that is part of the recovery. Or they have decided that instead of paying back of the house employees a salary out of their own pocket they will simply take tips from the waiters, who make $5/hr, to cover that pay. It is amazing that these same restaurant owners have gained your sympathy.
I hope you can move past the idea that the lawyers are just there to exploit the workers, because that is simply incorrect.
To 26
OK, make it 6 grand.
It is a legal loophole no doubt. That in and of itself would not make it wrong if they weren’t indirectly contacted by the law firm via ads to sue.
what happened to levanas restaurant-
to #24:
and to all those wondering why levana’s shut down. they’ve been open for over 30 years and most of their workers (chef, maitre d’, and most of the waiters) followed the kirschenbaum family to their next restaurant “pasta factory” in teaneck. i would guess that if they mistreated them or cheated them, the workers wouldn’t have followed so eagerly. obviously the workers are very loyal to the kirschenbaum family after years of good treatment. don’t just assume unless you know. oh and it doesn’t hurt to mention that the mashgiach married their daughter. so i would guess that the owner’s and workers got along just fine.