More Employees Sue Restaurants in Wage Disputes

August 31, 2015

*** The below article was featured in The Wall Street Journal on August 18, 2015 written by Thomas MacMillan.

Marie Sophie Jaafari spent more than five years checking hats and coats for patrons who regularly paid as much as a $75 prix fixe to dine on calf liver with lemon butter or veal kidneys in mustard sauce at Manhattan's Le Perigord.

During that time, she received occasional paychecks from the 50-year-old French restaurant and usually earned just tips, she alleged in a lawsuit filed last month in federal court in Manhattan.

In the suit, Ms. Jaafari accused Le Perigord of violating the Fair Labor Standards Act, which sets wage and hour standards for employers. Georges Briguet, owner of the renowned restaurant, denied violating any laws and described Ms. Jaafari as a private contractor, not an employee.

The lawsuit is the latest in a growing number of legal actions targeting pricey and renowned New York City restaurants. As New York prepares to increase the minimum wage for fast-food workers to $15 per hour and rolls out a statewide task force to combat worker exploitation, the recent flurry of litigation underscores how wage issues affect not only low-end restaurants but upscale eateries as well.

The number of wage-violation lawsuits has been on the rise for more than a decade, driven by a successful worker-organization movement, increased attention by plaintiffs' attorneys and complicated labor laws that leave some employers confused, according to legal analysts and industry leaders.

Nationwide, these lawsuits have doubled in the last 10 years in federal courts. In New York state, such lawsuits have nearly tripled in the last six years, rising to 1,738 in the fiscal year that ended June 30, compared with 652 in fiscal year 2009, records show. "The numbers are just scary," said Carolyn Richmond, a lawyer with two decades of experience representing restaurants. "We started seeing this trend in 2005 and it's never waned. It's continued to go up exponentially every year."

A 2014 study by the U.S. Department of Labor found that wage violations--concentrated mostly in the hospitality industry--result in between $10 million and $20 million of lost worker income a week in New York state.

During the first seven months of this year, the state recovered $11.6 million in unpaid wages in New York City, according to Gov. Andrew Cuomo's office.

Last month, Per Se, one of Manhattan's most expensive restaurants, reached a $500,000 settlement with the state attorney general's office on charges that the restaurant improperly withheld some tips from employees for nearly two years. And workers who claimed they were underpaid recently reached a $1.4 million legal settlement with celebrity chef Daniel Boulud, head of the Michelin-starred Daniel and Cafe Boulud.

Per Se said it had an "unintentional oversight" and employees were "never shortchanged." A Boulud representative declined to comment.

Last month, Lou Pechman, Ms. Jaafari's attorney, filed a half-dozen lawsuits against restaurants.

"The wage violations that we are seeing in New York City restaurants are as varied as the cuisines," he said.

The lawsuit Mr. Pechman filed on behalf of Ms. Jaafari alleges she regularly worked double shifts, sometimes seven days a week, beginning in January 2010, and received only tips. Starting in September 2014, the restaurant sporadically paid Ms. Jaafari varying amounts each week, from $100 to $700, the suit said.

Ms. Jaafari operated an independent coat-checking business at the restaurant, setting her own hours and earning a good living from coat-check fees, Mr. Briguet said.

"We never paid her anything until this past year," he said. "She cried to my son, telling him her apartment is very expensive. So, the last year my son paid her between $60 and $90 a day."

Mr. Briguet said he is disappointed by the lawsuit. "Since the first day I opened the business, every single law I have to follow, I follow it."

Terri Gerstein, head of the state attorney general's labor bureau, said wage-violation cases are having a moment in the spotlight.

"There's a lot more public attention right now and this is a moment where people are interested in these issues," she said. James W. Versocki, an attorney who worked in the state attorney general's labor bureau and now represents the New York State Restaurant Association, said much of the new litigation stems from confusion over regulations particular to the nature of service work. Litigation is on the rise also because of increasing interest by attorneys, who can attract business by targeting famous restaurants, Mr. Versocki said. "Certainly high-end restaurants are beloved by the plaintiffs' bar."

Another factor is a workers' movement that is gaining steam, said Haeyoung Yoon, a director at the National Employment Law Project, a nonprofit.

"There's so much momentum right now, with different groups coming forward," she said.

But while lawsuits may be increasing, most don't result in trial, said David Colodny, an attorney with the Urban Justice Center, a group that advocates for restaurant workers.

"Most cases settle because the employees generally are going to win," he said.

While Ms. Yoon and Mr. Colodny called for more enforcement measures to combat wage theft, Mr. Versocki said employers also need education to clarify complex labor regulations and keep New York's restaurant industry thriving.

"People don't come to New York to go to pharmacies and cellphone stores," he said. "They come for the uniqueness of Broadway and a great meal at an iconic place...You've got to make sure you don't kill that."

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