A Tip Pooling Dispute at Venice Steakhouse Has Led Six Servers to Protest

With Los Angeles’s recent increase in vaccinations, lowered COVID infection rates across the county, and the arrival of long-awaited stimulus checks, Angelenos are finally emerging from their homes and back into the city’s dining rooms after a year of ordering takeout and delivery. But diners who made their way to Venice steakhouse American Beauty on Friday, March 19, were greeted by a protest during what was supposed to be a triumphant return for the restaurant, which closed last year due to citywide mandates to curb the spread of COVID-19. Holding cardboard signs and chanting “pay your workers,” six servers hired to reopen American Beauty refused to work. The group picketed in front of the Rose Avenue restaurant in response to a new policy that changed how tips are divided among front- and back-of-house employees.

The servers at American Beauty say their wages have been unfairly cut and that the modified tip-pool percentages are meant to make up for management not raising wages for back-of-house employees — even though they claim the restaurant has the means to do so. Many restaurants across Los Angeles and the U.S. are grappling with how to rectify the traditionally accepted pay disparity between front- and back-of-house employees as they emerge from pandemic slumbers. From raising menu prices to eliminating tipping and pooling tips (requiring all tipped employees to contribute their tips into one collective pool that is divided among all non-management employees), restaurants are trying to address the need for greater equity across the board, though not always succeeding.

At American Beauty, servers’ share of the tip pool was 70 percent prior to the restaurant shutting down last March due to the coronavirus outbreak, according to management. The new structure allotted them 62.5 percent, with the remaining 37.5 percent divided among the hosts, bussers, runners, and kitchen staff. All of the servers interviewed for this story were under the impression that their share of the pre-pandemic tip pool was 75 percent, and thus the change to 62.5 percent proved especially jarring.

Several servers say that the restaurant’s general manager informed them prior to American Beauty’s reopening that the pre-pandemic tip pooling policies would remain unchanged. Though multiple employees requested clarity during training earlier last week to ensure that those percentages would remain the same, management declined to share information until three hours prior to the first reopening service on March 18.

While all of American Beauty’s employees earn at least $15 an hour per the citywide minimum wage, gratuity provides a sizable supplement to these earnings. Servers say that the redistributed tip pool is being used to justify lower wages for back-of-house employees like cooks and dishwashers, while Jeff Goodman, the CEO of the restaurant’s parent company, American Gonzo Food Corporation, which also own Pitfire Pizza, various Superba concepts, and walk-up burger stand the Window, contends that tip pooling equalizes pay among front- and back-of-house employees.

“The restaurant is trying to pit back of house against the front of house, acting as if it’s a zero-sum game and the only money they have to pay us with is the tip money, which is just not the case,” says Sam Sachs, a server at American Beauty since August 2019. He, along with the five other servers who are still employed by the restaurant, will not return to work until the 70 percent tipping pool share is reinstated and American Gonzo Food Corporation raises back-of-house wages for parity.

“If the kitchen team is not included in the tip pool, no matter how busy a shift or day happens to be, their compensation never changes,” writes Goodman in an email. “By being a part of the pool, they are aligned to the same benefit as the service team — when the restaurant is successful, they earn more money.”

Many of American Beauty’s servers, including Sachs, worked at the Window when the steakhouse’s dining room closed in March 2020. Though American Beauty’s tipping pool percentages initially carried over to the Window, they were changed to 50 percent for front of house and 50 percent for back of house in July 2020. The change in the amount of tips earned from selling $125 steaks versus $4 cheeseburgers meant a steep decline in pay for the former steakhouse servers, who earned livable wages prior to the pandemic at the always-busy restaurant. “I’ve never worked somewhere that would play with the tip structure so much,” says Derrick Tims, another steakhouse server who worked at the Window while waiting for American Beauty to reopen. “When the 50-50 structure happened, I specifically asked [the general manager] if the steakhouse would stay the same [when it reopened] and I was told, ‘Yes.’”

“It was a huge pay cut already working at the Window because of the lack of tips and the type of service,” says Sara Baton, an American Beauty server who also transitioned to working at the Window last March. “I was taken aback [by the 50-50 tipping pool] and it was difficult to process, but at the same time I felt helpless [because] there weren’t really jobs. I had asked [the general manager] if the tip pool and the tip sheet was going to stay the same for the steakhouse and I was assured that nothing was going to change, this was only happening for the Window. And so I thought, ‘Okay, well, I’ll just stick with it and I’ll wait it out until the steakhouse opens back up.’” Goodman denies that the former steakhouse servers were ever told that the tip structure would remain the same. While Baton, Tims, and Sachs anticipated working at the Window for a short time while the city managed multiple surges of COVID-19, they ultimately kept their jobs for nearly a year while American Beauty’s dining room lay dormant.

American Beauty began training its front- and back-of-the-house staff — a number of people who’d spent much of the past year working at the Window after American Beauty shuttered — for reopening on March 10, 2021. The group included veterans like Sachs, Tims, and Baton, as well as newly hired servers like Megan Mortensen, who also refused to work and picketed last week. “The bigger reason that we all walked out was really how they handled the situation,” says Mortensen. “Multiple servers have been asking every day of the five training days what the tip structure was going to look like, and every time [management] just dodged the question and would say, ‘This is not the right time for that.’ On our last day of training, [management] brought it up at the very end of the night and told us that if we wanted to know what our tip structure would be, we could come in at 2 p.m. the next day and that they would make an announcement.”

When Sachs walked into the meeting on March 18, the restaurant group’s director of operations and the restaurant’s general manager pulled him aside to talk. “They’re telling me that they’re expecting that I won’t like what’s about to come out,” says Sach. “And that if I speak up in this meeting, they will ask me to leave and not come back — threatening to fire me, so to speak. I’m shaking at this point, feeling like I need to throw up, there’s a pit in my stomach.” Servers who approached Sachs during the sidebar were shooed away, according to those present. Sachs rejoined his colleagues following the conversation and did not speak at the meeting for fear of retribution. Goodman denies Sachs’s account, but did not offer more details.

Once the mostly front-of-house staffers filed into the meeting, the director of operations shared the new 63-37 tipping structure with the group. He cited the “current social climate” for the decision, while the restaurant’s general manager shared the immense pride she felt in the more equitable allocation, according to the multiple servers present. Goodman denies the accuracy of the servers’ account of this meeting, but acknowledges in an email statement that due to the importance of the decision, “it had taken a long time.”

Server Sara Baton spoke at the meeting to inquire why the back of house wouldn’t be receiving increased compensation since they were moving from cooking $4 burgers to a steakhouse menu. “‘I think that they deserve a pay raise from the company’ — that’s what I said verbatim,” says Baton. “And that’s when [the director of operations] said that he didn’t agree that it should fall on the company. By the end of the meeting, when I had been shut down and been told to my face by the director of operations that my friends in the back of house don’t deserve to get paid more than minimum wage — I was very emotional. And as soon as the meeting was over, I just packed myself up and I left because I didn’t feel like I could get through to them, and at that point I had decided that I wasn’t going to come into work.” Baton sent a text message to the general manager soon after the meeting to let her know that she would not be returning to work until servers’ pre-pandemic tipping pool share was restored and the back of house’s wages were increased. Goodman denies the accuracy of Baton’s account.

“We as a business are doing everything we can to keep the business open during the COVID era,” writes Paul Hibler, the founder of American Gonzo Food Corporation, in an emailed statement. “Some might say we should pay the kitchen staff more. The short answer is we pay what we can and often more than minimum wage. We are responsible to take care of this business. I don’t think our doors will stay open if our cheeseburger was $30.”

Mortensen, who also sent a text message to the general manager that evening, echoing the same demands as Baton, contends that management put the employees in this position because of the limited opportunities currently available in the precarious pandemic job market. “They very much just thought that we would just go with it and keep the job because it’s a pandemic and obviously everyone is very scared about work right now, so I think they thought they could just totally do whatever they wanted with our money and we obviously cannot agree,” she says.

“They thought that [the timing] would make it harder for us to be able to resign because we didn’t have enough time to find another job,” says Baton. “I’m just really disappointed with the entire management team and the executive chefs and salary-paid workers who stood by and allowed this to happen.”

Though the lack of transparency in disclosing the new tipping structure was problematic for the servers, the actual policy was tougher for many to swallow, especially those who worked at the Window and witnessed how the company seemed to be succeeding throughout the pandemic.

“We worked with a manager and an executive chef every night, and between the two of them, I could overhear them talking about the numbers of sales that were made each day,” says Baton. “From what I’ve gathered, on a regular Monday through Thursday, we were making at least $8,000 in sales. On weekends we would make over $10,000 in sales, and one of the record-breaking days that we just had a month ago we made $22,000 in sales in one day. Very rarely did we have any slow days. In fact, the worse the pandemic got, the busier that we got because of all the restaurants shutting down.”

“The managers are pretty vocal about it — like, they’ll talk over the pass a lot of times and we’re standing there working as they’re telling us, like, ‘Oh, wow, we’re going to beat last year’s record,’ or, ‘Wow, we beat last Saturday’s record,’” says Tims. “They didn’t hide it, they were proud about it.”

Goodman refutes the accuracy of the sales figures, but said he could not share the actual numbers, citing confidentiality. “The pandemic hit American Beauty hard,” he wrote via email. “We had as much failure as success in managing through all of the day-to-day and bigger picture problems.”

The Window opened a second location on the Venice boardwalk in September 2020, and a third one is scheduled for Silver Lake this summer. Based on the servers’ knowledge of the Window’s sales and the restaurant group’s expansion plans, they contend that American Gonzo Food Corporation possesses the financial capabilities to pay all of its workers fair wages rather than redistribute tips to lessen labor costs. Both the boardwalk and Silver Lake locations were planned prior to the pandemic and American Gonzo Food Corporation was “obligated to fulfill” those commitments, said Goodman in an emailed statement.

The group of six servers have not stepped inside the restaurant since March 18 and are spreading the word about the dispute through social media and by passing out flyers in front of the restaurant last weekend. No further demonstrations are planned at the time of publication. As a result of their protest, the restaurant’s Yelp listing has been flooded with one-star reviews, while its Instagram account received enough negative feedback to prompt disabling comments on posts. “We don’t want to see [American Beauty] fail; we just want to see it succeed in the right way. We want to see the tip share revert to 70 percent to the servers and with that, commensurate wage increase to make up for whatever that difference in tips would be,” says Sachs. “We are not calling for a boycott of any kind. Plenty of good people need this job, no matter what extent it may be exploiting them. We just wish for those good people to get paid closer to what they deserve.”

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