United States: Employers Escape Private Claims Under The Tennessee Tip Statute

Executive Summary: In Hardy v. Tournament Players Club Southwind, the Tennessee Supreme Court held that an employee cannot pursue a private right of action under the Tennessee Tip Statute, T.C.A. § 50-2-107. This statute sets forth an employer's duty to pay service charges, tips, and gratuities to its tipped employees.  This decision overrules the Tennessee Court of Appeal's ruling in Owens v. University Club, which held that an employee may pursue a civil action against an employer under the statute.

Background

Tournament Players Club Southwind (TPC Southwind), a private club with dining and banquet facilities, hired plaintiff, Kim Hardy (Hardy), as a server/bartender in 2004. At the club, customers pay a mandatory service charge at each restaurant and bar. Patrons also have the option to include an additional tip to their bartender or server. TPC Southwind then distributes the money collected from the service charges to all food-service employees in their paycheck, as well as the additional gratuities. Hardy alleged that TPC Southwind violated the statute when it dispersed the money collected to tipped and non-tipped employees. TPC Southwind argued that Hardy could not bring a lawsuit because the Tennessee Wage Regulation Act does not afford an employee a private remedy.

Tennessee Supreme Court Decision

Although the Tennessee Supreme Court held that Hardy clearly fell within the protection of the Tip Statute, it considered whether a private right of action could be maintained under the statute. The Court examined (1) whether the party bringing the claim is an intended beneficiary within the protection of the statute, (2) whether there is any indication of legislative intent, express or implied, to create or deny the private right of action, and (3) whether implying such a remedy is consistent with the underlying purposes of the legislation. Based on these three factors, the Court ruled that the state legislature did not intend to create an implied private right of action under the Tip Statute, even though Hardy was an intended beneficiary under T. C. A. 50-2-107.

The Court further reasoned that there was no evidence that the legislature envisioned a private right of action being created from the Tip Statute. This rationale led the Court to find that the express language of the Tip Statute is inconsistent with the creation of a private right of action. The plain language of the statute classifies a violation as a separate offense and Class C misdemeanor. Thus, if an employer is found to have violated the Tip Statute, it could be required to pay up to a $50 fine per offense.

Bottom Line for Employers: While an employer remains liable for any violation of the Tennessee Tip Statute, the State and not the individual must bring the action.

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