A tip-splitting case at Missoula's The Keep could change the way Montana restaurants do business 

Amy Graham, a career server, secured a job in 2013 at Missoula's the Keep restaurant, whose perch in the South Hills offers panoramic views of the city. To employees, it also offers the promise of a decent living. Between her minimum wage and tips, Graham earned nearly $21 an hour.

Graham actually earned more than that, but the Keep requires servers to "tip out" one-third of their gratuities to dishwashers, cooks, table bussers and other staff. In Graham's case, that amounted to more than $12,000 over two years.

Voluntary tip sharing is commonplace in the restaurant business, a way to share earnings with everyone who contributes to a good meal and experience. But by enshrining the custom as policy, the Keep was on shaky legal footing. Montana law says tips are wages, which the state has long interpreted through rule to mean that only the employees who receive them can decide where the money goes.

In April, the Montana Department of Labor and Industry confirmed that rarely enforced law, awarding Graham $19,265 in unpaid wages and penalties in a wage claim case she filed last year.

click to enlarge The state awarded a Missoula server $19,265 in unpaid wages, saying a restaurant policy requiring her to share tips with other workers broke Montana labor laws.
  • The state awarded a Missoula server $19,265 in unpaid wages, saying a restaurant policy requiring her to share tips with other workers broke Montana labor laws.

Faced with what Keep attorneys call potentially "calamitous" ramifications, the Keep appealed DLI's decision to Missoula County District Court on May 26. If the ruling stands, many more Montana restaurants and their workers could feel the effects.

"The law is very clear," says Mark Anderlik of Unite Here! Local 23, which represents service workers. "The problem had been enforcement."

The state enforces its wage laws only when workers bring forth complaints. Graham says she decided to file her claim after raising the matter privately with Keep co-owner Melissa Mooney. The Keep's tip policy had been in place for decades, at least since Mooney and her husband, Reed, were working in the kitchen themselves. Graham says she figured the owners just weren't aware of the law. Her meeting with Mooney "did not go well," and the next day, Graham says, she was terminated.

Graham says she didn't object to sharing her tips, she just thought the decision was hers to make.

"Who doesn't want to have a say in where their earnings go?" she says. "Serving is already kind of a position where you're looked down upon. It's not considered a real job."

In a statement, Keep attorney David Lighthall calls the restaurant's policy a "fair and equitable" way to acknowledge employees' collective efforts that "complies entirely with Montana's wage laws." (Montana is one of only seven states where tipped employees must also be paid the state minimum wage of $8.15 per hour.) The restaurant argued in administrative filings that a ruling in Graham's favor would bankrupt the restaurant and the associated Highlands Golf Club. If its 13 servers all successfully pursued similar complaints, the Keep could be on the hook for $200,000 in unpaid wages over the last two years alone, according to the Keep's attorneys.

Graham and others who spoke with the Indy say mandatory tip-splitting is common throughout the state, meaning that millions in unpaid wages may be owed to servers.

The ruling in Graham's case shouldn't come as a surprise, state officials say. For a tip-sharing scheme to be legal, it must be agreed to by the employees, says DLI staff attorney Quinlan O'Connor. The law has been on the books for more than 40 years.



But O'Connor can't name another wage claim case related to tip-splitting, nor would the DLI estimate how widespread the practice might be.

As Anderlik notes, tipping is a "touchy" issue for employers. Three popular Missoula restaurants did not return requests for comment for this story, nor did the Montana Restaurant Association. Anderlik, a former cook, agrees that tip-splitting is more "equitable" for restaurant staff, but says that better remedies—namely, raising wages—exist.

Missoula restaurant Rumour, which opened in May 2016 with a no-tipping "hospitality included" policy, tried just that. Employees earned wages between $13-$19 per hour, with gratuity costs built into the menu prices. Nobody liked it. Co-owner Colleen Powers says the system wasn't appealing to employees, and guests balked at the higher prices. Rumour abandoned the experiment after six months, and the restaurant's staff eventually agreed on a 25 percent tip-splitting scheme. New employees are informed of the arrangement when they're offered a job.

What's ironic, Powers says, is that diners are willing to pay a premium for local or organic ingredients, but are less inclined to support cooks with a living wage.

"We think people are more important than animals, but that's hard to get across sometimes," Powers says.

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