Where do the tips you leave your restaurant servers go? Maybe not where you think.

An announcement last week that a Honolulu restaurant owner had been ordered to pay his workers more than $70,000 in tips that he had pocketed offered a glimpse into a practice that Hawaiʻi workers who rely on tips, their advocates and government investigators say happens regularly.

“Particularly in the restaurant industry, there are a lot of issues that relate to tips” being withheld, said Terence Trotter, director of the Department of Labor Wage Hour Division’s Honolulu district office.

That can hit restaurant workers hard.

“As a server, you just live off of tips,” said Chase Binkley, a longtime server who said he quit a large Waikīkī restaurant after its owners started distributing tips to servers through debit cards instead of in cash at the end of their shifts, which coincided with an immediate drastic drop in tip payouts.

Complaints to managers and the restaurant’s accountant went unheeded, Binkley said, and like many other hospitality workers he never reported it to the government. Eventually most of the workers left, replaced by new staff who didn’t know what servers had historically earned.

“They’re like, ‘Oh, I’m making good money.’ It’s like, ‘No, they’re stealing from you,” said Binkley, who had worked at the Kalākaua Avenue restaurant for three years before leaving five months ago.

According to the state Department of Business Economic Development and Tourism, in 2023 there were 3,191 restaurants in Hawaiʻi, employing an average of 54,000 people. Employees of full-service restaurants earned an average annual wage of $36,851 while employees at limited service restaurants — like Domo Cafe, where customers typically order their food at a counter — earned on average $26,803 a year.

Violating Federal Regulations

The recent Department of Labor case announced Dec. 2 involved Domo Cafe sushi and poke restaurants in Kāhala and Chinatown.

Domo Cafe owner Shu Cong Wu disbursed tips from cash and credit card payments to employees only after first taking a share for himself, Trotter said. That violates the federal Fair Labor Standards Act. 

Wu did not respond to messages left at his restaurants or with his family.

Trotter said Wu “claimed to be unfamiliar with the regulations that detailed the restrictions on managers/owners sharing in the frontline server tip pool.”

The department ordered him to pay 14 of his workers a combined $72,000 in tips, plus $79,000 in damages.

Not Commonly Reported

The scale of the problem is difficult to gauge because people often don’t complain to the government authorities charged with investigating wage theft. In addition, Trotter and worker advocates said sometimes employers just don’t know it’s illegal for owners and managers to share in tips unless they are working as a server in a section of their own.

Nelson John Salvador of Hawaiʻi Workers Center, who trains and organizes low-wage restaurant workers to stand up for their rights, wasn’t familiar with the Domo Cafe case.

“Wage theft and tip theft, actually, in Hawaiʻi is prevalent,” Salvador said. “The problem is we don’t know more because people don’t know where to go to complain, but we know there is a lot of that happening in the restaurant business.”

Between October 2023 and this week, Trotter said his district office – which covers Hawaiʻi, American Samoa, Guam and Saipan – conducted 21 investigations that uncovered tip violations. The cases have led to more than $212,000 in tips and $204,000 in damages being paid so far to 312 restaurant workers.

The department also has a search tool for people to check if they are owed money from wage related employer violations.

Restaurant Owner Blames An ‘Oversight’

Soon after the Department of Labor’s Dec. 2 announcement about the Domo Cafe case, a conciliatory mea culpa was posted on the restaurant’s Instagram account.

“We want to reassure everyone that the situation was purely an oversight and not indicative of any malicious intent,” said the post, signed, “Warm regards, The Wu Family & Domo Staff.”

The post also said: “The events in question occurred several months ago and have since been addressed effectively. During a routine audit, we identified certain accounting discrepancies, which we acted upon promptly to rectify.”

The Department of Labor launches investigations after employees or a third party complain, Trotter said, or when the department performs random surveys in industries where violations are known to be frequent.

He would not disclose what led to the Domo Cafe investigation, but contrary to the Instagram post, he said investigators reviewed three years of Wu’s business practices, finding that “the employer inappropriately included themselves in the tip pool of the tips that were collected to be shared” by employees.

Investigators interview employees and examine, among other things, a restaurant’s records of its business transactions and annual sales, payroll receipts and time card records.

On top of the tips and damages, Wu had to pay one worker more than $7,000 in withheld overtime pay. Trotter said overtime violations are far more common targets of his department than the less commonly reported issues with tips. 

Trotter said his office is stepping up its enforcement and education efforts.

“We want to make it very clear that the tips are the property of the workers,” he said, “which is important to people on the lower end of the wage remuneration.

“There’s standards for the people who serve the food and create that atmosphere, and we’re about standards for workers,” he said. “When we talk about returning tips, we’re saying we want to make sure that the minimum standards for the workers have been met.”

Workers and others who suspect violations involving restaurant tips can file confidential complaints with the Department of Labor here.