There Is No Private Right of Action for Violation of the Tip Statute

By: Robert D. Martin, Esq.

Hardy v. Tournament Players Club at Southwind, Inc. d/b/a “TPC Southwind,” No. W2014-02286-SC-R11-CV (Tenn. March 8, 2017). 

The Tennessee Supreme Court recently held that a server may not sue her employer for violation of the Tennessee Tip Statute. The Court’s opinion overturned the decision of the Court of Appeals, who in 2015 declared that the tip statute contained an “implied right of action.”

Kim Hardy was a server and bartender at the Tournament Players Club (“TPC”) at Southwind golf course in Memphis. TPC customarily added a mandatory service charge to every bill at its bars and restaurants, in addition to allowing customers to pay optional tips. The Mandatory Service Charges were placed in a pool and were paid out to employees on their regular paychecks. The traditional tips were also not paid to employees until their regular paychecks. Ms. Hardy alleged in her Complaint that the service charges were distributed to non-service employees, which would have violated the tip statute. The tip statute requires that restaurants which automatically add a gratuity onto a customers’ bills distribute the tips only among employees who have rendered the service. The statute makes a violation of the law a misdemeanor, but does not specifically state than an employee may sue their employer for a violation. 

The trial court dismissed the case for failure to state a claim, after it determined that the Tip statute did not allow a private right of action, meaning that an employee could not sue its employer if the employer violated the statute. The Court of Appeals reversed, relying on a 1998 Court of Appeals decision that found an implied private right of action under the tip statute.

The Supreme Court disagreed, overturning the Court of Appeals. The Court held that the Tennessee General Assembly, in passing the tip statute, gave no indication that it intended for a private citizen to file a lawsuit for a violation of the statute. The statute is criminal in nature since it provides that a violation of the statute is a misdemeanor. This means that if the employer broke the law, it was up to the government to hold the employer accountable, not the employee.

The tip statute is different than other wage and hour laws. For instance, the Fair Labor Standards Act, the federal wage law, not only provides for a private right of action for violations of the statute, but also provides that an employee may file a “collective action,” remarkably similar to a class action, on behalf of fellow employees who were also not paid in accordance with the law.

If you are an employer in the food service industry, and you have questions regarding how to compensate or handle tips for your employees, contact Meridian Law for a consultation.