U.S. Department of Labor Says McMenamins Unlawfully Required Servers to Give Managers Portion of Tips

The U.S. Department of Labor sent a letter to former employees of two McMenamins alleging that the Portland-based restaurant chain unlawfully required its servers to give assistant managers a cut of their daily tips, to the tune of more than $800,000 over a three-year span.

The federal agency wrote in the Jan. 23 letter that the violations took place between 2019 and 2022 at two locations: McMenamins Edgefield, an entertainment campus that contains a concert venue and hotel, and McMenamins Cedar Hills, in Beaverton.

If the findings are true, it’s a violation of the U.S. Fair Labor Standards Act. “An employer may not require an employee to give their tips to the employer, a supervisor, or a manager,” the Department of Labor says on its website, “even where a tipped employee receives at least the federal minimum wage (currently $7.25) per hour in wages directly from the employer and the employer takes no tip credit.”

But the feds wrote there’s nothing they can do to force the company to return the allegedly stolen tips; only a court of law can force the company to comply.

Founded in 1983 by Portland brothers Mike and Brian McMenamin, the chain—which spans nine hotels, 24 restaurants, theater pubs and concert venues across Oregon and Washington—is now valued at $180 million.

The Department of Labor confirmed the validity of the letter to WW on Monday afternoon.

The feds wrote that it decided not to file a lawsuit against the company. “Consequently,” the feds wrote, “no further action will be taken to secure payment of additional money possibly owed to you.” So the employees are out of luck unless they try to reclaim the tips themselves through litigation.

McMenamins denied any wrongdoing in an email, stating that its tip-pooling practice is lawful and that it includes assistant managers and assistant-assistant managers. McMenamins spokesman Daniel Sanderson wrote that McMenamins is “baffled” by the feds’ investigation.

“We’re as baffled as you are by the Department of Labor’s investigation. McMenamins has never kept and will never keep any money from tip pools. We’ve always complied with Oregon law and fully distributed the tip pool to eligible employees,” Sanderson said. “This includes our assistant and assistant assistant managers, who work alongside other front-of-house employees to ensure our guests have a great experience. As hourly, entry-level, non-exempt positions, they’re entitled to overtime and a portion of the tip pool; it’s both legal and appropriate. We have no plans to exclude them.”

McMenamins is no stranger to hardship in recent years. In late 2021, the company’s employee database was the target of a ransomware attack, leaving sensitive information about former employees dating back 25 years vulnerable.