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Lawsuit alleges Olive Garden parent company's tipping policy causes discrimination

Darden Restaurants is facing a lawsuit from One Fair Wage, which alleges the company’s tipping policy leads to sexual harassment and racial discrimination.
Darden Restaurants Locations Ahead Of Earnings Figures
Diners wait outside an Olive Garden restaurant in Thornton, Colorado, U.S., on Friday, March 19, 2021.Chet Strange / Bloomberg via Getty Images
/ Source: CNBC

Advocacy group One Fair Wage is suing Olive Garden parent Darden Restaurants, alleging the company’s tipping policy encourages sexual harassment and racial discrimination against its waitstaff.

The complaint, which was filed Thursday in California federal court, is the latest salvo in the battle against the tipped minimum wage. In 43 states, employers can pay their workers as little as $2.13 an hour as long as that hourly wage and tips add up to the locality’s pay floor. Otherwise, the employer has to make up the difference.

The tipped minimum wage was last raised in 1991, but Democrats attempted to get rid of it earlier this year as part of their plan to raise the federal minimum wage. The amendment to add an increase to the federal pay floor to the latest Covid-19 relief bill failed to pass the Senate, but Democrats will likely revisit the issue again during President Joe Biden’s four-year term. Darden was among the restaurant companies that vocally opposed getting rid of the tipped wage.

In the lawsuit, One Fair Wage says that Darden’s tipping policy causes its employees who are people of color to earn less than White employees. A poll of Darden workers conducted by the advocacy group found that servers who are people of color made 18% less in tips per hour than White servers. The lawsuit also alleges that Darden’s policy gives managers the ability to influence servers’ wages because they can assign servers to shifts or seating sections that tend to result in lower tips.

The complaint also alleges that servers who are paid less than the minimum wage experience more sexual harassment than waitstaff who work in localities that require Darden to pay them the minimum wage.

“The cash wage policy is the direct cause, or at least a motivating cause, of this disparate impact,” the complaint said.

Managers may tell their servers to dress more suggestively to earn higher tips and turn a blind eye to sexual harassment in order to keep the customer happy, according to the lawsuit.

The advocacy group suggests several alternatives that could help, including pooling tips, adding a standard service charge to all bills or providing standards to customers that would minimize the role of race in tipping decisions. Darden’s current corporate policy allegedly does not allow managers to use different tipping systems.

One Fair Wage is the only plaintiff named in the complaint. The group argues that it has the standing to sue Darden because it has had to divert more time and money to helping the company’s workers, including paying out $175,000 in financial assistance to employees because of the coronavirus pandemic.

One Fair Wage filed a complaint with the Equal Employment Opportunity Commission in September but requested that the agency dismiss the charge in March. The EEOC issued the group with a right to sue notice, which gives it 90 days to file a lawsuit in federal court.

One Fair Wage is asking the court to declare that tipping policies like Darden’s are illegal and violate the Civil Rights Act of 1964. The plaintiff is also seeking an injunction against Darden from maintaining those policies and employment practices.

Darden did not immediately respond to a request for comment from CNBC.

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