Angry Crab Shack Accused of Wage Violations in Arizona Federal Court

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The companies and individuals who operate several Angry Crab Shack locations in Arizona are facing a proposed collective action that takes issue with the restaurants’ alleged pay practices.

The four named plaintiffs in the case are current or former employees who say they were paid less than the required minimum wage while working as servers at the defendants’ restaurants. According to the lawsuit, the defendants applied a tip credit to servers’ wages yet required them to surrender the money they earned in gratuities into an unlawful tip pool from which non-tipped employees were compensated. Further, the defendants supposedly required each employee to contribute one dollar per shift into a fund owned and maintained by the restaurants. Employees were permitted to “borrow” from the fund “on an as-needed basis” but were always expected to promptly reimburse the money they borrowed, the suit explains. These practices effectively denied employees the full amount of the tips they earned in potential violation of the Fair Labor Standards Act’s tip credit requirements, according to the lawsuit.

On top of the alleged minimum wage violations, the case claims the defendants miscalculated employees’ overtime rates. Instead of multiplying the full minimum wage rate by 1.5 and then subtracting Arizona’s maximum $3 tip credit limit to arrive at employees’ proper overtime rates, the defendants supposedly multiplied the workers’ sub-minimum tip-credited rate by 1.5, effectively applying a tip credit of more than the allowable $3. As explained in the complaint:

“In order for an employer of tipped employees to calculate the proper overtime rate, such employer must multiply $8.05 [Arizona’s minimum wage rate in 2016] by one and one-half, for a total minimum overtime wage of $12.08. If that employer has satisfied its tip credit obligations, it may impose a tip credit on that overtime rate of up $3.00 per hour, for a total minimum overtime hourly rate of $9.08.

If an employer were to instead calculate its tipped employees’ overtime rate by multiplying the tip credit rate of pay of $5.05 by one and one-half times, for a total rate of $7.58, such a calculation would be improper, and would have the effects of: (1) increasing the tip credit imposed by the employer beyond the permissible $3.00 to $4.50 hourly, and (2) imposing two separate and distinct tip credits upon the tipped employees.”