HR Strange But True!
February 11, 2010

If your employees receive tips from customers, recent research conducted by Cornell University reveals why these tips could expose you to a discrimination lawsuit.

Cornell's Center for Hospitality Research looked at casual restaurants with both a diverse workforce and customer base. The researchers examined how customers rated waiters' service on a scale of 1 to 5 and how they tipped them.

While customers gave both black and white servers perfect ratings on their service, there was a difference in how both white and black customers tipped employees who received perfect scores for their service. Customers tipped these white servers 23.4 percent of the bill, but they tipped black serversjust 16.6 percent of the bill, according to the study. Again, both groups of these employees received perfect scores for their service.

Lead researcher Michael Lynn says this discrepancy in tips raises the possibility of an employee lawsuit. He cites adverse-impact discrimination, which involves an employer practice that while neutral on its face has a disproportionate effect on a protected class.

Lynn says that while discrimination claims over customers’ tips have yet to be tested in courts, employers with tipped employees should monitor tips and consider making changes to account for the bias in tipping if one exists.

“If a racial difference in tip income is observed, then the restaurateur should either: (1) replace tipping with service charges or service inclusive pricing, (2) pool tips (if state law permits) and distribute them equitably across server race, or (3) make up the racial difference in tip income with supplemental wages for their black servers,” Lynn writes in a research brief on the study.

Source: Cornell Center for Hospitality Research

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