South Carolina restaurant repays $624,000 to staff after tip pool is ruled illegal

• A South Carolina restaurant required staff to share tips with managers illegally, the DOL said.
• The restaurant said a lawyer had advised that its tip pool policy was legal and appropriate.

A seafood restaurant in South Carolina has repaid $624,000 to workers after the Department of Labor found it had forced them to share tips with other staff.

The Charleston restaurant, 167 Raw, "shortchanged" 92 workers by "forcing them to participate in an illegal tip pool" that included management and other employees who did not usually get tips, the department said in a press release.

The repayment equates to around $6,700 per worker.

Managers and supervisors are not allowed to keep their workers' tips "under any circumstances," including through tip pools, per the Fair Labor Standards Act.

US employers can pay tipped staff as little as $2.13 an hour, with tips bringing their take-home pay up to a minimum of $7.25 an hour.

Because the restaurant required the staff to share tips illegally, it invalidated its claim to a tip credit and therefore meant workers were paid less than the federal minimum wage, the DOL said.

Following the investigation, 167 Raw was ordered to pay $624,017 in back wages to the 92 staff.

167 Raw King Street LLC, which owns the restaurant in Charleston along with two others, said it entered into a voluntary agreement with the DOL over its tipping policy.

The company told Insider that before setting up the tip pool it had been advised by lawyers that the move was legal.

"Months later, however, the Department of Labor concluded that these procedures were in direct violation of certain federal guidelines. The department began a full investigation and determined that while we had not intentionally violated any regulation, we had instead relied upon incorrect legal advice," the company said.

167 Raw King Street said it cooperated with the DOL to establish new procedures and corrected the "misallocation of tips." The company's owners never took part in the tip pool, it added.

Millions of restaurant workers have quit their jobs during the pandemic, with many blaming the industry's low wages, lack of benefits, and poor working conditions. In March alone, 810,000 workers in the food services and accommodation sector quit their jobs, according to the Bureau of Labor Statistics.

Jamie Benefiel, a DOL official in Columbia, South Carolina, said: "As food service industry employers struggle to find people to fill the jobs needed to remain competitive, they must take into account that retaining and recruiting workers is more difficult when employers fail to respect workers' rights and pay them their full wages."