Roy Yamaguchi Responds to Labor Settlement

What's a back stocker and what does it have to do with Roy's restaurants' labor troubles?

The U.S. Department of Labor recently ordered Roy's to pay $225,000 in tips and back wages to current and former servers and "back stockers," affecting all six Roy's restaurants in Hawaii.

Why?

Here's where the back stockers come in. Roy Yamaguchi created the position for his restaurants years ago, as a front of house spot, complete with the uniform worn by the wait staff and others visible to diners. Back stockers were compensated like tipped employees, participating in a front of house tip pool.

However, the Department of Labor disagreed on the back of house designation. The back stockers' main duties are to polish glasses and silverware, which by the Department of Labor's definition, makes them part of the kitchen staff and ineligible to participate in a tip pool.

Yamaguchi recently called me to explain the situation, maybe because he knows I'm interested in tip issues, but more likely because he wanted to clear up a key point. The misconception is that his employees were earning less than minimum wage, when in fact their take home pay, which includes tips, was much more than the minimum wage. So why the payout?

Because some of the servers' tips went to back stockers, the Department of Labor ruled that Roy's Holdings needed to pay the servers their proportion of tips that were given to the back stockers. In addition, it ordered Roy's Holding's to pay the difference between the back stocker's base rate and minimum wage. The base rate for the front of house is $7, which is 25 cents less than minimum wage. This is allowed because of tip credits, which account for the fact that the front of house will be making a portion of their wages in tips.

The back stockers don't have to repay the tips, i.e. they can keep the tipped amounts. But while they may receive extra money from the settlement, the back stockers are worse off moving forward. Roy's restaurants had to remove them from the tip pool and now pays them $10 an hour, which is actually less than they used to make—an average of $16 an hour when you factor in tips, according to Yamaguchi.

The net result of all of this headspinning calculation is that the restaurants make less and the back stockers make less. All because of somewhat arcane considerations as to what constitutes the back of the house and what constitutes the front.