The no-tipping lawsuit against Danny Meyer and Co. shows diners still won’t pay fairly for labor
If you read this column frequently (thanks, if you do), you know that I’m inordinately fond of court documents. Judges’ opinions are the best. But complaints are fascinating too, lifting the curtain on how the world really works, how law and regulation permeate our lives, and how interested parties jockey for power and money in the court system.
Mostly, the pleasure of getting to see the machinery at work outweighs my emotions about any bad behavior I might see revealed. (Sorry. It’s an occupational hazard.) But a suit I read this week got past my shields and left me discouraged and confused.
Let me drag you down with me.
The suit was brought in California’s Northern District (traditionally called the “Food Court” because it sees so many of them), and it accuses a bunch of Bay Area and New York City restaurateurs—including Danny Meyer and his Union Square Hospitality Group, Tom Colicchio and his Crafted Hospitality, and David Chang and his Momofuku group—of price fixing and restraint of trade. What did they do wrong? According to the suit, the much-publicized effort to put an end to tipping at their restaurants amounted to a criminal conspiracy that “unlawfully transfers millions of dollars from customers and servers to restaurant owners in violation of federal and state antitrust laws.” It continues by calling bullshit (rightly or wrongly) on the alleged conspirators’ stated intentions: “Participating restaurants and a compliant media have portrayed the no-tipping/higher prices movement as intended to promote social justice and equality, while the real aim and effect is greater profit at the expense of workers and consumers.”
I’m not qualified to judge whether the anti-tippers have in fact broken the law by talking together and sharing their ideas for how to change the way they do business. Price fixing is a complicated field. The fact that the restaurants all charge different amounts isn’t a defense. Neither is the idea that they can point to an admirable intention—better pay for the back-of-house staff. The laws have been interpreted such that almost any kind of information sharing or attempt to standardize the way prices are calculated or published can be considered collusion. Does a changed business model qualify? Well, we’re talking about the Northern District, where almost anything is possible.
The bulk of the lawsuit document is perhaps the strangest one I’ve ever seen. Instead of constructing an argument on how the defendants’ behavior violates the law or marshalling evidence, it just presents page after page of clips from news sources, most of them unattributed. We hear Danny Meyer and Tom Colicchio in news interviews and on talk shows. We hear from random restaurant workers and others. Everybody is talking at cross purposes.
That’s the first element in my distress at reading this suit. I’m used to seeing the lawyers for the plaintiff (or the defendant) mapping a path through the muddle of daily life, not just dumping it on the page. In this suit, the muddle is all we have: Danny Meyer explains why he wants to pay his cooks more, and why it’s unfair that he’s legally barred from including them in the tip pool. A waiter says he lost 20 or 25 percent of his pay when tipping was ended at his restaurant. Various unidentified speakers say that if restaurant owners want to pay cooks more, they should just pay cooks more.
The picture that comes across is of an unsolvable mess. The cooks need more money, but the owners say they can’t pay more. That’s hard to reconcile with the wealth of some of the owners. (In 2015, for instance, Forbes pegged Danny Meyer’s wealth at $600 million, much of it from the IPO and subsequent stock performance of Shake Shack, the fast-casual restaurant chain he founded in 2004 in New York City. The internet says Tom Colicchio is worth $20 million, though it doesn’t say how it knows.) But it isn’t necessarily false. These owners aren’t generally alone in their enterprises. Their investors and partners aren’t going to let them hand away margins, even if the owners want to.
So the tip thing makes sense, right? Except that it kind of doesn’t. Meyer’s original idea was that if you fold the amount people leave in tips into the menu price, or better yet a service surcharge, you can share the money with the back of the house, and the waiters will still make a decent living. It all works if you’re willing to suspend the law of the conservation of money (that it’s not how much you make but how much you keep that determines your financial status). Shift a tip to a charge, and you have to pay sales tax on it—8.875 percent in New York. And if the plan is to move cooks’ pay from $10 or $11 an hour up closer to the “thriving” range Meyers says he wants, you’re not going to be able to do it without raising prices more like 40 percent than 20 percent.
And will people pay 40 percent more? Here’s where the suit gets ugly and perplexing for me. Because though it starts out by complaining about diverting money from servers, it’s actually a suit on behalf of consumers who feel defrauded by the alleged price fixing. Which, I think, means they’re suing because a bunch of restaurant owners got together and said, “Gee, we ought to be charging something closer to what it would cost to serve a meal if we were paying everyone adequately.” In other words, they’re suing for the right to pay less for a product than it’s worth.
That’s not an unfamiliar attitude. When you look at the battle over immigration, it’s partly over the idea that the United States needs to have a class of underpaid farm workers, so we can all pay less for our food than we ought to have to. We buy clothes made in global sweatshops because we’re not willing to pay our fellow Americans a decent wage to make them. We let a company like Walmart pay low wages, squeeze employees on hours, and disrupt entire supply chains in the name of lower prices. (In case you were wondering, in 2012, Politifact ran the numbers and confirmed that the Walton family, who own about half of Walmart, were worth $89.5 billion—about as much as the cumulative net worth of the bottom 40 percent of Americans.)
Now, I know that I’m being simplistic. I know that jobs most of us don’t want to do for nine or ten bucks an hour are so attractive to other people that they risk their lives sneaking into the country to get them. I understand that trade is more complicated than I will ever comprehend, and that you mess with market forces at your own peril. But even after I acknowledge all of that, I’m not satisfied. I have no objection to looking for bargains. I don’t willingly pay more than I have to for what I buy. But I’m an old-fashioned guy. I want to pay what I owe. Though, I don’t have any confidence that I do, or any clear idea of how to change that. (Go ahead, email me about CSAs and knowing my farmer. I’m not the only one capable of being simplistic.)
That’s bad enough on its own. But then I pick up a lawsuit, my favorite kind of document, and I read that maybe it’s illegal for someone to want to make things better. The last thing I need is for public institutions to push me more in the direction of behavior I don’t approve of in myself.
On the brighter side, I hear that the Yellowstone mega-volcano may be poised to blow us all to kingdom come sooner than anyone expected. That’s a cheerful thought.