Fifteen Percent or Less: A Title VII Analysis of Racial Discrimination in Restaurant Tipping

Fifteen Percent or Less: A Title VII Analysis of Racial Discrimination in Restaurant Tipping Jacob Kline  ABSTRACT: At least three studies have demonstrated a racial disparity in the amount of money cab drivers and restaurant servers receive in tips. The facially neutral policy of basing restaurant servers’ income largely on the tips they receive produces a discriminatory outcome by paying white servers more than nonwhite servers. Such a discriminatory outcome is the hallmark of a Title VII disparate impact case, but there are a number of potential challenges that may impede the successful pursuit of such a case. These include the availability of a disparate impact claim to challenge wage discrimination, the difficulty of defining a challengeable employment practice, and the sufficiency of the statistical support for the claim. Notwithstanding these challenges, this Note argues that there is a reasonable chance of success for such a case and that restaurants should adopt one of the three proposed alternatives to avoid liability: pooling tips, using a fixed percentage gratuity, or eliminating tipping altogether.  J.D. Candidate, The University of Iowa College of Law, 2016; A.B., Brown University, 2011. I want to thank the student writers and the editors of the Iowa Law Review for their work on this Note. I am also thankful for the support and encouragement of my parents, brothers, and my wife, Alice Baker, throughout my law school career. A special thanks to Professor Michael Lynn of the Cornell University School of Hotel Administration for inspiring me to write on this subject. 1652 IOWA LAW REVIEW [Vol. 101:1651 I. INTRODUCTION ........................................................................... 1652 II. HISTORY OF TITLE VII EMPLOYMENT DISCRIMINATION .............. 1654 A. T HE C IVIL R IGHTS A CT OF 1964 ........................................... 1654 B. T HE C IVIL R IGHTS A CT OF 1991 ........................................... 1656 C. T WO D IFFERENT E MPLOYMENT D ISCRIMINATION M ODELS ...... 1656 1. Disparate Treatment Employment Discrimination ............................................................. 1658 2. Disparate Impact Employment Discrimination ........ 1659 III. CHALLENGING ELEMENTS OF A DISPARATE IMPACT WAGE DISCRIMINATION CASE ................................................................ 1660 A. S TUDIES D EMONSTRATING R ACIAL D ISPARITY IN R ESTAURANT T IPPING ................................................................................ 1661 1. Racial Disparity in Taxi Drivers’ Tips ........................ 1661 2. Racial Disparity in Tipping at a Southern Restaurant .................................................................... 1663 3. Racial Disparity in Tipping at a Midwestern Restaurant .................................................................... 1665 B. P AY D ISPARITY AS E MPLOYMENT D ISCRIMINATION .................. 1666 1. The Equal Pay Act of 1963 ......................................... 1666 2. The Lilly Ledbetter Fair Pay Act of 2009 .................. 1669 3. Disparate Impact Under Title VII .............................. 1671 C. E MPLOYMENT P RACTICES ...................................................... 1672 IV. ANALYZING A TITLE VII CLAIM FOR RESTAURANT WORKERS ...... 1675 A. A VAILABILITY OF T ITLE VII FOR T IPPING W AGE D ISCRIMINATION ................................................................... 1675 B. R EASONABLE A LTERNATIVE P RACTICES .................................. 1677 V. CONCLUSION .............................................................................. 1679 I. INTRODUCTION Title VII of the Civil Rights Act of 1964 provides protections against workplace discrimination based on five protected statuses, one of which is race. 1 Throughout its history, the Supreme Court has seen fit to expand the protections of the Civil Rights Act in some areas and restrict it in others. When Congress determined that Court decisions were too restrictive, it passed the Civil Rights Act of 1991 to codify positive aspects of previous decisions. 2 1. Civil Rights Act of 1964, Pub. L. No. 88–352, § 703, 78 Stat. 241. 2. Civil Rights Act of 1991, Pub. L. No. 102–166, § 2, 105 Stat. 1071. 2016] FIFTEEN PERCENT OR LESS 1653 Currently, a Title VII plaintiff can bring a claim under a disparate treatment theory—alleging discriminatory intent, or a disparate impact theory— alleging that a facially neutral practice has a discriminatory outcome. 3 In a Title VII disparate impact case, the plaintiff–employee must demonstrate that an employment practice creates a discriminatory impact. 4 Then, the burden of proof shifts to the defendant–employer to demonstrate that the employment practice is job related and consistent with business necessity. 5 Finally, the burden shifts back to the plaintiff to prove that there is a reasonable and less discriminatory alternative practice that the defendant refuses to adopt. 6 In order to bring a Title VII disparate impact case challenging race-based discrimination in restaurant tipping, a plaintiff must overcome a number of hurdles. One issue is that a plaintiff must get a court to recognize that she can bring a disparate impact claim to challenge wage discrimination. 7 Additionally, a plaintiff must overcome the difficulties stemming from the fact that Title VII does not clearly define employment practices. Finally, a plaintiff must convince the court that they have sufficient statistics to establish a viable disparate impact claim under Title VII. This Note argues that paying servers the tipping minimum wage and relying on tips to make up the majority of their compensation is illegal workplace wage discrimination under a Title VII disparate impact analysis because there is a racial disparity in the amount white and nonwhite servers receive in tips. Part II summarizes the history of Title VII employment discrimination law from the passage of the Civil Rights Act of 1964 through today, including the two models under which a case can be brought. Part III begins with an analysis of the studies that demonstrate the existence of racial disparity in tipped worker income. Part III concludes by addressing a number of potential difficulties with bringing such a discrimination case, including the availability of a disparate impact theory for wage discrimination and issues with defining an employment practice. Part IV examines the challenges restaurant employees face in bringing a disparate impact claim and proposes three alternative practices to the current tipping model that would eliminate the discrimination: pooling tips, using a fixed percentage gratuity, and eliminating tipping altogether. 3. See, e.g. , Ricci v. DeStefano, 557 U.S. 557, 577 (2009) (“Title VII prohibits both intentional discrimination (known as ‘disparate treatment’) as well as, in some cases, practices that are not intended to discriminate but in fact have a disproportionately adverse effect on minorities (known as ‘disparate impact’).”); Watson v. Fort Worth Bank & Tr., 487 U.S. 977, 986–87 (1988) (same). 4. Watson , 487 U.S. at 986–87. 5. 42 U.S.C. § 2000e-2(k)(1)(A)(i) (2012); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802–03 (1973). 6. Watson , 487 U.S. at 998; Albemarle Paper Co. v. Moody, 422 U.S. 405, 425 (1975). 7. See Nicole Buonocore Porter & Jessica R. Vartanian, Debunking the Market Myth in Pay Discrimination Cases , 12 GEO. J. GENDER & L. 159, 181 (2011). 1654 IOWA LAW REVIEW [Vol. 101:1651 II. HISTORY OF TITLE VII EMPLOYMENT DISCRIMINATION Title VII of the Civil Rights Act of 1964 (“1964 Act”) established a federal law banning employment discrimination. 8 Following developments in case law that curtailed the scope of Title VII, Congress enacted the Civil Rights Act of 1991 (“1991 Act”) to amend the 1964 Act, codifying some of the case law addressing Title VII while overriding some court interpretations. 9 Title VII establishes two methods by which an individual can prosecute a discrimination claim: (1) disparate treatment, where employees or job applicants are treated differently because of a protected status; and (2) disparate impact, where a facially neutral practice produces an unintended discriminatory result. 10 A. T HE C IVIL R IGHTS A CT OF 1964 In 1964, Congress passed the Civil Rights Act of 1964, a wide-reaching law that addressed a variety of areas of society with a history of discrimination, including voting rights, public accommodation, and public education. 11 Congress enacted Title VII of the 1964 Act to address discrimination in various employment contexts. 12 Title VII specifically prohibits an employer from refusing to hire, firing, or discriminating against an individual “because of such individual’s race, color, religion, sex, or national origin.” 13 Title VII further prohibits an employer from “limit[ing], segregat[ing], or classify[ing] his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.” 14 Congress included these equal employment opportunity provisions in an attempt to improve employment equality by prohibiting the forms of discrimination that prevented protected minorities (especially African-Americans) from fully participating in the workplace. 15 At the time of the passage of the 1964 Act, African-Americans primarily worked in unskilled or 8. Civil Rights Act of 1964, Pub. L. No. 88–352, 78 Stat. 241. 9. Civil Rights Act of 1991, Pub. L. No. 102–166, § 2, 105 Stat. 1071. 10. See, e.g. , Ricci v. DeStefano, 557 U.S. 557, 577–78 (2009); Watson , 487 U.S. at 986–87. 11. Civil Rights Act of 1964, Pub. L. No. 88–352, 78 Stat. 241. 12. Id. §§ 701–16. 13. Id. § 703(a)(1). 14. Id. § 703(a)(2). Race, color, religion, sex and national origin are the only five protected statuses under the Civil Rights Act of 1964. See Mark R...