Madision Square Garden Loses Appeal Regarding Unpaid Tips

On February 11, 2014, the First Department Appellate Division of New York affirmed denial of a motion to dismiss a claim brought originally by Plaintiffs, food and beverage servers at Madison Square Garden. Madison Square Garden is owned by MSG Holdings, LLC (“MSG”) and is considered one of the largest sports and entertainment complexes in the world. As a result of this decision, the case will proceed.

The complaint brought by food and beverage servers alleges that at sports and entertainment events, MSG would charge and collect “service charges” in the amount of 20 percent of the total charge assessed for all food and beverages. These service charges would immediately be added to the bill and the servers would not be permitted to collect tips. As a result, servers argue that MSG led its customers and patrons to believe that the service charges were entirely gratuities for the service staff at these events. This was not the case though, as MSG did not distribute all the service charges collected to its servers.

In response, MSG argued that because Plaintiffs belong to United Here Local 100 (“Union”), which represents members who work predominantly in the hotel, food service, laundry, warehouse and casino gambling industries, the terms and conditions of the Plaintiffs’ employment are governed by the collective bargaining agreement (“CBA”) entered into between the Union and MSG. The terms and conditions of the CBA state, any “dispute, claim, or complaint concerning the interpretation or application of [its] terms’ shall proceed through the grievance procedures and, if the dispute is unable to be resolved, it shall be submitted to arbitration.”

After reviewing both arguments, the Court ruled in the favor of Servers given that the CBA entered into between the Union and MSG is not controlling in this dispute. In order to be controlling, a CBA must be clear as to the waiver of the employees’ rights. As Judge Renwick stated:

In this case, nothing in the CBA states that the employees waive, or that MSG may keep for itself, gratuities exceeding the stated percentages. Since there was no clear, unmistakable waiver of plaintiffs’ statutory rights to the full amount of any gratuity collected by defendant, MSG’s argument that plaintiffs’ contracted away their statutory rights is unavailing… [Furthermore a] CBA cannot preclude a lawsuit concerning individual statutory rights unless the arbitration clause in the agreement is “clear[ ] and unmistakable[ ]” that the parties intended to arbitrate such individual claims.

Sports and entertainment complexes frequently violate laws regarding their employees’ wages. Thus anyone who has worked as a Waiter, Runner or other service staff employee at any sports and entertainment complex during the past years may have a wage claim. Please contact the New York City employment lawyers at Fitapelli & Schaffer, LLP, (212) 300-0375, to schedule a free consultation to discuss your rights under the Fair Labor Standards Act and the New York Labor Law.