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Caught skimming the tip pool

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Bkeats Mar 8, 2012 05:53 AM

Very disappointing story about Mario Batali and his partner who were caught taking money out of the tip pool for servers, bus boys, etc. and have agreed to settle for $5.25 million. As someone who has gone to his restaurants and tipped well for good service, this is enough to make me stop going to Batali places.

http://dinersjournal.blogs.nytimes.co...

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    Bellachefa Mar 11, 2012 12:06 PM

    The more I look at it , the more disgusted I get. And I wasn't even aware of the Wynn tipping scandal. Maybe MA should consider that as he tries to open a casino here.

    "Wynn said he wanted to equalize the incomes of dealers and their supervisors."

    Equalize the income yourself Mr Wynn!!!! Why the hell should I or my tips equalize it for you. You're a frickin millionaire, not some midieval war lord!

    And Mario? Stealing from the poor to pay for wine research? Pay your sommelier's a decent wage! How dare you make your wait staff pay them while you expand your brand.

    Just two ugly egomaniacs that think that think they are entitled to make there patrons not only pay for the privledge of visiting their establishment but think we should pay for their staff's income and health insurance. Aholes.

    7 Replies
    1. re: Bellachefa
      SWISSAIRE Mar 11, 2012 01:41 PM

      One facet of this case not as yet mentioned is the responsibility of the insurer.

      The insurance company frequently decides in favour of settlement of any litigation involving a policyholder. Initially, this may be against the wishes of the policyholder, as evidenced by the early comments of one of the partners prior to the settlement. Reasons for such a settlement have been mentioned above, but may be also triggered by evidence of a " known and willing violations of state and municipal business rules and regulations, " a repeated pattern of violation of same, and the very obvious fact that such a trial will result in a loss to the insurer, including a massive punitive award.

      In any good business plan, restaurant operational expenses do not originate from customer tips, no matter how well the liquor sales are doing. Doing the mathmatics (as GH1618 has clearly done) on the very lucrative wine and spirits business in said restaurants, the settlement award of $ 5.25 MM USD was significantly the lesser of the two penalty amounts. Especially if the case were lost in a jury trial. Not exactly chckenfeed, but $ 5.25MM USD is actually a very small amount for these two gentlemen to pay considering the profits.

      Take care of your employees as your " family, " and they will take care of you. If you don't, ... well, here you are.

      1. re: SWISSAIRE
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        Bellachefa Mar 11, 2012 02:24 PM

        great post. As I understand, the 4-5% of wine sales added up to about 5 mill a year

        1. re: Bellachefa
          danna Mar 12, 2012 05:43 AM

          was the $5 mil 4-5% of wine sales, or of tips on wine sales?

          1. re: Bellachefa
            Bada Bing Mar 12, 2012 07:09 AM

            That percentage would indicate over 100 million dollars per year in gross wine sales. Something over a quarter million per day. That's hard to believe, but what do I know about that high-life world?

            1. re: Bellachefa
              hotoynoodle Mar 12, 2012 09:41 AM

              i can't find this number anywhere? do you have a link? that would mean over $12 million in wine sales per restaurant. not impossible in an extremely large venue, but not likely across the board. it would also put his places in the tier of top-grossing units in the country and they're not up there.

              http://www.localeats.com/dine-n-dash-...

              although del posto did have the highest guest check average at $155 pp.

              1. re: Bellachefa
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                GH1618 Mar 14, 2012 07:47 AM

                Where do you get per year? Doesn't the $5M settlement cover several years?

              2. re: SWISSAIRE
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                Scary Bill Mar 12, 2012 08:38 AM

                Insurance companies do not typically make settlements for illegal behavior of an insured, and, in the limited instances where they do, they would subrogate against the insured to be made whole, including the settlement and any legal fees. So Mario and his partner would have to open their wallets for this one. I assume they both agreed to the deal once they knew the full range of possible consequences which were probably greater than the settlement, and not limited to cash out of pocket, ie, reputation.

            2. hotoynoodle Mar 11, 2012 11:15 AM

              as a restaurant lifer, i know it's a dirty business and have witnessed numerous class action suits based on misappropriation of tips.

              just because a guy is on tv doesn't mean he's ethical.

              1. mattstolz Mar 10, 2012 05:52 PM

                i just want to know if this deal is why Del Posto raised the lunch prix fixe price

                just a few days before my lunch reservation of course.

                1. EM23 Mar 10, 2012 11:07 AM

                  Dirty business. One can only hope that the Dept. of Labor will be taking a closer look at the Batali/ Bastianich empire for other labor violations.

                  1. b
                    Bellachefa Mar 8, 2012 09:38 PM

                    I posted earlier but it vaporized.

                    Quite a few years ago I had the pleasure of eating at Babbo's bar. As a solo diner, the bar staff paid me exceptional attention.

                    I noted that the floor behind the bar was tough on the feet. I suggested they ask Mario to buy them a few gel pad runners, which was a relatively new product.

                    Imagine my shock when one of them told me they had asked Mario and he refused.

                    I left with great appreciation for some good food. I shared my leftovers with a homeless woman in Washington Square. But my opinion since that night has remained the same. I lost a lot of respect for Chef.

                    1. dave_c Mar 8, 2012 09:56 AM

                      According to the article, "Employees were told the money was to cover expenses related to wine research and to cover broken glassware..."

                      Those expenses shouldn't come out of the tip pool. That should come out of the restaurant's operating expenses.

                      Based upon that statement alone, the employees have a winner.

                      8 Replies
                      1. re: dave_c
                        rockandroller1 Mar 8, 2012 10:07 AM

                        ohhhh, I agree, this does put a different spin on it. Yeah, that's not cool. Ok, I retract my argument. Thanks CHers!

                        1. re: dave_c
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                          freia Mar 8, 2012 12:22 PM

                          I still feel there is more going on here. The 5.25 million dollar award is out of line with the actual egregiousness of the activity. I think this was only part of the issue, and the settlement covered more than what the media is reporting. I can't imagine anyone paying out 5.25 million dollars for skimming what I'm sure was only in the tens of thousands. It almost feels like there was waaay more going on, and part of the settlement was to fork over the cash in exchange for a moratorium on future or pending lawsuits. Interesting that the lawyers get 1/3 of that LOL. I'm totally in the wrong profession...

                          1. re: freia
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                            Scary Bill Mar 8, 2012 12:49 PM

                            I'm with you.

                            1. re: freia
                              rockandroller1 Mar 8, 2012 12:53 PM

                              I dunno. Given the # of restaurants involved and that this goes back several years and the settlement goes to ALL front of house staff who have basically ever worked there, I can see that figure. It's not like he runs cheap diners.

                              1. re: rockandroller1
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                                Scary Bill Mar 8, 2012 01:16 PM

                                That would equate roughly to over $130 million in wine sales, if the info on how the holdback as calculated above is correct. Seems pretty large. Also, if there was no culpability, $5.25 million buys 5,250 hours of high priced legal aid @ $1,000 per hour. I think this was a broader settlement.

                              2. re: freia
                                danna Mar 8, 2012 01:11 PM

                                Check my math: 1100 employees x 2 years(not 8 to account for turnover) x 52 weeks x 5 nights = .6 mil evenings worked

                                assume 4 tables a night (because not all the employees are waiters) x $200 in wine x 20% tip x .04 skimmed. Does that come to $3.6 million? I feel like my math has gone wrong somewhere, but if not...that's a chunk. Especially if you add the risk of treble damages if a judge found in favor of the class + court costs + MASSSIVE legal fees on both sides that could easily exceed the origiinal amount. $5 mil might not seem that bad.

                                1. re: freia
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                                  GH1618 Mar 8, 2012 01:13 PM

                                  Here's the math: There are 16 restaurants listed on the MB website, all off them seemongly high-end. The settlement averages about $330,000 per restaurant. If the actual damages were under $100,000 as you suggest, that would be only $6000 per restaurant. If a dinner for two were only $100 plus a $20 tip, and the restaurant took $2 of that, they would have to serve only 3000 couples to reach $6000. How long would that take? How big are these restaurants? It could be a week or two.

                                  But an average dinner for two will be much higher than $100 in these restaurants, I expect. A bottle of wine can be $100 or more in better restaurants. The actual damages alleged would have been much higher than you suggest, I think.

                                  1. re: GH1618
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                                    Bkeats Mar 9, 2012 06:37 AM

                                    I've been to a few of his places. Other than Otto, I think its very difficult for 2 to have dinner with wine and come out at $100. An inexpensive bottle of wine is probably $40 and there are many in triple digits. Most likely pushing $200 when you're all done. While the food isn't the pinnacle of Italian, I've enjoyed it. This story plus some others about him are making it diffcult for me to spend my money in his restos.

                              3. g
                                GH1618 Mar 8, 2012 08:41 AM

                                I don't know what the backstory is, but there is no excuse for management raiding the tip jar, even if it doesn't go directly into the owners' pockets.

                                12 Replies
                                1. re: GH1618
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                                  Scary Bill Mar 8, 2012 08:44 AM

                                  $5.25 Mil tells the story. They were culpable.

                                  1. re: Scary Bill
                                    Davwud Mar 8, 2012 08:50 AM

                                    Yup.

                                    DT

                                    1. re: Scary Bill
                                      EWSflash Mar 13, 2012 08:05 PM

                                      +1

                                    2. re: GH1618
                                      rockandroller1 Mar 8, 2012 08:50 AM

                                      Ok, playing Devil's advocate here, since obviously none of us know what really happened. What if part of the employment agreement stated that a certain percentage of your tips would be diverted to support other staff - an arrangement not uncommon places I've worked, which were too downscale for a wine person but the tip-out went to the bartenders, barbacks, and hosts/hostesses. What if that was the case here, but it was considered "fine print" and nobody read it. And then they complained and brought this suit, alleging that nobody reads the fine print, which is the type of thing many lawyers are good at in these types of cases. So then they'd have to pay. It doesn't mean they actually did anything wrong.

                                      Again, I'm not saying they did or didn't do anything intentionally wrong. I'm just saying the settlement does not tell the whole story. Many cases have been settled just to make the issue go away when the defendant did not actually do the thing in question.

                                      1. re: rockandroller1
                                        danna Mar 8, 2012 09:01 AM

                                        Obviously I don't know what went on here, but in the linked story it appears that the 4% was disclosed in advance to the employees. Seems they could decline the job if they weren't cool with it.

                                        And yes, a settlement means nothing from the standpoint of guilt. I can say from experience that a company can spend millions in attorney fees defending a case where they did NOTHING wrong, and then settle for more millions, to avoid spending even MORE millions in legal fees. I should have gone to law school.

                                        1. re: danna
                                          rockandroller1 Mar 8, 2012 09:03 AM

                                          There is a post on another site from a current employee of his that sounds like they all know about it, but think it "sucks." I agree it sucks, but branding it as deceptive or stealing doesn't seem to be right.

                                        2. re: rockandroller1
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                                          GH1618 Mar 8, 2012 09:06 AM

                                          It's normal for tips to be shared with the secondary servers such as bus boys (or girls) and barbacks, and so forth. A wine steward is a server, and is entitled to a share of service tips even when the food and wine (and tip) is combined on one bill. Taking a cut for salaries or restaurant overhead such as breakage is not at all the same and is improper.

                                          I don't know what they put in employment agreements, but once you write it up you are in the domain of contract law and whatever legislation applies. Evidently there was enough of a problem to get the complaint certified as a class action, and as Scary Bill wrote, "$5.25 mil tells the story."

                                          1. re: GH1618
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                                            secondbecky Mar 8, 2012 09:23 AM

                                            I seriously doubt that the busboys, etc., had an employment agreement. (pls correct me if I'm wrong). Every place I worked, waiters tipped out 10% to support staff.

                                          2. re: rockandroller1
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                                            Bkeats Mar 8, 2012 09:47 AM

                                            You're correct in that we don't know the whole story, but the article states that the policy was to hold back an amount equal to 4-5% of the wine sales. When I've been to his restos, the wine portion of my bill is anywhere from 1/3 to 1/2 of my total bill. If I'm tipping 20%, then 20-25% of the portion of the tip that comes from the wine is going to the house. So roughly 10% of the total tip goes to the house. The story does not say it was re-distributed to any other staff. It was supposed to cover glass breakage and wine reserach. Well isn't that supposed to already be built into the price of the wine?

                                            1. re: Bkeats
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                                              HoosierFoodie Mar 12, 2012 09:40 AM

                                              "Wine research" should really tell everyone all they need to know!

                                              1. re: HoosierFoodie
                                                EWSflash Mar 13, 2012 08:09 PM

                                                That's kind of what I thought, given Mario's and John's combined voracious appetites for wine. "wine research" should have been renamed something like "fund for the rabid shop vacuum -like wine habit of the owners". I'm just sayin'.

                                                1. re: EWSflash
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                                                  Bellachefa Mar 13, 2012 08:12 PM

                                                  that was funny

                                        3. rockandroller1 Mar 8, 2012 08:23 AM

                                          I think there is more to the story here. They were not keeping the money, they were using it for sommelier's salaries. I'm not ready to denounce them without explanation, though it obviously does stink a little and I wish they could come out and set the record straight. Settlements don't always mean that the defendant was wrong; sometimes it appears that with high profile people or establishments, cases are settled because it's cheaper and quicker to avoid continued, lengthy and expensive trials that could be detrimental to the institution if they continue being dragged through court.

                                          It's possible they didn't explain up front they were doing this, or that it was explained in fine print in an employee contract and the argument was that nobody read it or saw it or something, or that they were taking it from too many FOH people instead of just from servers or something. It just seems unlikely that 2 knowledgeable restaurant owners like these two would attempt just blatantly break the law, especially since the money wasn't going into their pockets, it was paying others' salaries. We may never know.

                                          3 Replies
                                          1. re: rockandroller1
                                            Davwud Mar 8, 2012 08:50 AM

                                            "Settlements don't always mean that the defendant was wrong; sometimes it appears that with high profile people or establishments, cases are settled because it's cheaper and quicker to avoid continued, lengthy and expensive trials that could be detrimental to the institution if they continue being dragged through court."

                                            True. But not for $5.25M when you were skimming from the tip jar.

                                            DT

                                            1. re: rockandroller1
                                              obiter_dicta Mar 10, 2012 01:59 PM

                                              On the other hand, could we not argue that the money was indirectly going into their pockets if they could "pay" salaries using not the revenue generated by the sale of food, but rather using the FOH's tip money? The lower bottom line has the effect of increasing their profit, and maybe allowing them to pay themselves more....

                                              1. re: obiter_dicta
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                                                GH1618 Mar 10, 2012 02:42 PM

                                                No need to argue. It appears that it was indirectly going into their pockets.

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