A federal judge has ordered Houston-based Perry’s Steakhouse & Grille to pay more than $21 million after finding the upscale chain operated an unlawful tip pooling system that steered servers’ gratuities to workers who were not eligible to share in tips under federal law. The ruling caps years of complaints from hundreds of servers who said the setup left them earning only a few dollars an hour in base pay before tips, as per the Houston Chronicle.
According to the final judgment filed Tuesday and reported by the Houston Chronicle, Perry’s must pay about $3.4 million in back wages to more than 700 servers, roughly $7.1 million in misappropriated tips and about $10.5 million in damages and fees, for a total tab topping $21 million. The Chronicle notes that plaintiffs say the challenged practices ran from 2019 to 2022 and left some servers making as little as $2.13 an hour before tips. The judgment follows years of filings and a prior ruling that the tipping arrangement violated federal labor law.
Perry’s Restaurants has said it disagrees with the decision and plans to appeal. Chief Operations Officer Rick Henderson told the Houston Chronicle the company is “committed to treating employees fairly and maintaining transparent, lawful compensation practices that are commonplace in the industry.” Plaintiffs’ lead counsel has described the outcome as confirming servers’ claims that the tip pool helped subsidize the restaurant’s broader labor costs.
What the court found
Court records show that servers alleged Perry’s required them to kick in a fixed percentage of their sales, with plaintiffs pointing to a 4.5 percent contribution, into a mandatory tip pool. According to those filings, the pooled money was used to pay AM hosts, bussers and other staff who primarily worked before the restaurants opened to guests. The plaintiffs argued this violated the Fair Labor Standards Act because the pool was not limited to employees who are “customarily and regularly” tipped. Those allegations and earlier rulings are laid out across federal filings and orders, including in the Colorado case docket and a Western District of Texas order addressing related claims and partial summary judgment.
Documents filed in the Colorado case describe the companywide policies at issue and detail how the tip sharing and side work practices were applied at multiple Perry’s locations. The Western District of Texas order adopted a magistrate judge’s recommendations on several related questions while leaving other claims for further proceedings, underscoring how long the litigation against the chain has been playing out.
What the law says
The U.S. Department of Labor explains that employers may not keep employees’ tips and that, when an employer takes a tip credit toward its minimum wage obligations, pooled tips can be shared only among workers who customarily and regularly receive tips. The agency’s guidance also says managers and supervisors are barred from participating in tip pools and that employers using mandatory tip pools must keep proper records of how tips are collected and distributed.
Next steps and local impact
Perry’s has vowed to appeal, a move that could delay collection of the judgment while higher courts review the case. If the award is ultimately upheld and enforced, affected servers could receive back wages and refunded tips, although how and when that money shows up will depend on the pace of appeals and any collection efforts.
Perry’s lists locations around the country on its website and still operates multiple Houston area restaurants. The ruling also lands shortly after the chain closed its River Oaks location in January.
