Class Action Lawsuit Settlement Reached

WEST OCEAN CITY -- A class action lawsuit against a popular restaurant chain, including its West Ocean City operation, over unfair wages for tipped employees was closed last week when the defendants reached a settlement totaling over $43,000 with several of the plaintiffs in the case.

In late October, the Sakura Japanese Steakhouse chain was named the defendant in a class action lawsuit filed by a handful of former employees in U.S. District Court, alleging unfair labor and wage practices. The suit alleged Sakura not only did not meet the minimum wage requirements under the “tip credit,” but also withheld earnings from tipped employees and used them to compensate management and back-of-the-house staff.

“The defendants violated the requirements of the tip credit by keeping and assigning to their own use a substantial portion of the tips received by the plaintiffs,” the complaint reads. “Specifically, the defendants took the pooled tips belonging only to the plaintiffs and used the tip money to pay and increase the salaries and compensation of managerial and non-customarily tipped employees including but not limited to the general manager, the chefs, the kitchen the back-of-the-house staff.”

The class action suit alleged Sakura’s 13 restaurants, including the West Ocean City location, failed to meet state and federal minimum wage requirements for its tipped employees. Employers can take advantage of a “tip credit” for certain employees, allowing them to pay the difference between what the employees earn as tips and the $7.25 mandated minimum wage.

As a result, according to the complaint, Sakura owed the named plaintiffs and others who qualify the cash difference of the $3.08 they were paid and the $7.25 mandated minimum wage, or $4.17 per each hour they worked and were not compensated correctly under the tip credit.

Under the federal Fair Labor Standards Act and the state Wage and Hour Law, in order to qualify for the “tip credit,” a business entity must pay employees who receive gratuities at least half of the mandated $7.25 per hour minimum wage. In short, the complaint alleges the plaintiffs should have been paid $3.63 per hour even if they had received their entire share from the tip pool and the gratuities weren’t divided between the managers and back-of-the-house staffs.

Last week, Sakura settled with the named plaintiffs in the case to the tune of $43,156. The highest settlement for an individual plaintiff was $13,941, while the second highest award was $11,407. The lowest came in at $4,230.