Celebrity Cash: Don’t mess with your wait staff’s tips

Here’s a tip: Don’t mess with your wait staff’s tips.

Celebrity television chef Mario Batali recently reached a $5 million agreement to settle a class-action lawsuit that accused him and a business partner of cheating employees out of their tips and failing to pay them overtime or minimum wage, reports Bloomberg.

In the lawsuit, the employees claimed that Batali and Joseph Bastianic violated the Fair Labor Standards Act when they pocketed gratuities equal to as much as 5 percent of nightly wine sales. Various employees said they were told their tips were being skimmed to pay for the restaurant’s large wine selection or to cover broken glassware.

The Batali settlement sparked a debate on The Chow.com over whether it’s fair for restaurant owners to take a server’s tips and redistribute them to others working in the restaurant. The practice is called “tipping out.” Tipping out is different from what Batali and his partner allegedly did in their restaurants. They were accused of taking a portion of the tips to cover operating expenses.

So, is it fair to make the wait staff share their tips?

“While enforced tip pooling is a violation of the law in some states, it’s still customary in plenty of establishments,” wrote John Birdsall and Joyce Slaton on The Chow.com. “Where it does happen, it boils down to this: Do servers own their tips, or should they share them with the entire staff of a restaurant?”

Slaton came down on the side of not tipping out. She wrote: “I know that tipping out is a tradition, but it verges on fraud. You are taking money a diner left for a specific purpose, and distributing it without that diner’s knowledge or consent.”

Birdsall says it’s all about being fair. Having cooked in restaurants and catering kitchens for 15 years he believes tips should be pooled. In his counterpoint, he wrote: “The income inequality between cooks and waiters was stunning. In my best gig, the owners made it clear that servers were expected to tip out: bussers, line cooks, even the dishwasher. It was a way of enforcing teamwork, of snuffing out the sense that some workers were worth more than others. Tipping out is an acknowledgment of the truth of food service, which is that, from top to bottom, a restaurant staff is a team.”

This all brings me to the Color of Money Question of the Week, courtesy of the discussion between Birdsall and Slaton: Do you like tipping in restaurants? And, if not, would you be willing to pay higher food prices to eliminate the tip system? Send your comments to colorofmoney@washpost.com. Put “Celebrity Cash” in the subject line. Please include your full name, city and state.

Little Tax Mistakes, Big Tax Problems

It’s almost here. It’s the day many people dread: the deadline to file your tax return, which this year is April 17.

Greg Rosica, a tax partner at Ernst & Young, shared with the Wall Street Journal some ways to avoid common mistakes when filing your taxes.

Here are a few.

--Review last year’s return. See if any suspended deductions will be useful this year, especially charitable contributions or capital losses.

--Remember to include your Social Security number on each page of a paper return.

--Check that you have claimed all dependents, such as elderly parents who don’t live with you.

--If you are single and have a dependent, check to see if you qualify for lower “head of household” rates.

--Property taxes are deductible, but assessments—such as for street repair, sidewalks, sewers or curbs—are not.

HUD’s Foreclosure Report Comments

I received a lot of responses to last week’s Color of Money question, in which I asked: “What do you think of HUD’s report on the behavior of bankers in foreclosing on homeowners?”

The Washington Post’s Brady Dennis recently wrote about the Department of Housing and Urban Development’s findings that employees at major banks who forged signatures, made up fake job titles and falsely notarized paperwork often were ordered to do so by their bosses. In some cases, the employees were judged on how fast they could move the foreclosure documents along.

“It would be great news if the directors, board members and managers could be held accountable for the systemic misuse and abuse of the foreclosure laws,” wrote Brent Hulsebus of Des Moines, Iowa. “Unfortunately, it is all too likely that those responsible will get away with stuffing the stockholders pockets yet again. Identifying the fools will prove too difficult. The golden rule these days seems to be ‘Get mine before someone else takes it!’”

“Personally, I think the bankers who oversaw the illegal signing behavior of employees should see some serious jail time,” wrote Aldene Fredenburg of West Swanzey, N.H. “Beyond the insensitivity and downright cruelty of using illegal behavior to evict people down on their luck, this robo-signing is going to further complicate problems for future buyers. How in the world is a buyer going to get clear title to a piece of property if the original documentation can’t be found and the documentation in existence is a forgery? This slows down the housing recovery considerably.”

Not everyone was harsh on the bankers.

“In almost every case, it’s a case of folks who borrowed more than they could afford, or folks whose income can no longer support paying their mortgage payments,” Jim Shaffer of Indianapolis wrote. “If a homeowner wants to challenge a foreclosure on the basis that the paperwork is missing or fraudulent, that homeowner has every right to appear in court and make that challenge, always has. What we have here is a case where the correct action was taken based on fraudulently endorsed documents. The bank is culpable for that wrongdoing, but it doesn’t change the homeowner’s rights or responsibilities.”

Kelly B. of Kansas City took a similar stance. “Granted, the banks were negligent in foreclosure activities. But my sympathy doesn’t go to either the banks or the owners of the foreclosed homes,” he said. “I had a home that I had to sell because I lost 80 percent of my business in 2008 and I had to take a humongous loss and sell it for a very big loss. I now live in a house that is one-fourth the cost of the other house. That’s what too many people are not willing to do.”

Spend Well, Live Rich

My new PBS pledge special, “Spend Well, Live Rich,” is airing this month on various PBS-affiliated stations. Here’s a link for a video preview of the special.

Watch for the program in your local area.

Upcoming Events

On Saturday, March 24, at noon, I will be speaking at the Jacksonville (Fla.) Public Library as part of a series of free programs to help people navigate financial issues. Click on this link for more information, or call (904) 630-2665.

Tia Lewis contributed to this e-letter.

You are welcome to e-mail comments and questions to singletarym@washpost.com. Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”
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