Tennessee Supreme Court Holds That Memphis Food Service Employee May Not Sue Employer for Violation of Tennessee's Tip Statute

March 8, 2017

The Tennessee Supreme Court has held that a Memphis food-service employee may not file a lawsuit against her employer for distributing tips in a way that violates Tennessee’s Tip Statute, because the law does not allow a private party to file suit for a violation.

Tennessee’s Tip Statute requires restaurants and clubs that automatically add a gratuity or tip onto a customer’s bill to distribute the tips collected “among the employee or employees who have rendered that service.”  The statute makes violation of the law a misdemeanor.

Kim Hardy worked as a food server/bartender for the Tournament Players Club at Southwind. The Club customarily added a mandatory tip onto every customer’s bill at its bars and restaurants. The Club then distributed those tips to many types of employees, including kitchen employees and even managers.

Ms. Hardy filed a lawsuit against the Tournament Players Club, claiming that the Club owed her damages because it had distributed tips to employees who were not entitled to receive them, in violation of the Tip Statute. The trial court dismissed Ms. Hardy’s lawsuit, holding that the law did not allow a private citizen such as Ms. Hardy to file a lawsuit to collect damages for her employer’s violation of the Tip Statute.

In a split decision, the Court of Appeals reversed. It recognized that the Tip Statute did not say directly that a food service employee such as Ms. Hardy could file a lawsuit seeking damages for violation of the law. Nevertheless, relying on a 1998 Court of Appeals decision, it held that Ms. Hardy had an “implied private right of action” under the Tip Statute, that is, it found implied intent by the legislature to allow a private citizen to file a lawsuit for violation of the law. The Tennessee Supreme Court granted the Club permission to appeal.

The Tennessee Supreme Court reversed the Court of Appeals and overruled the 1998 Court of Appeals decision. The Court found that Tennessee’s legislature had given no indication that it intended to allow a private citizen, such as Ms. Hardy, to file a lawsuit to collect damages for violation of the Tip Statute. The only remedy provided in the law was to charge an employer, such as the Club, with a misdemeanor. Since the Court declined to find “implied” intent by the legislature to allow a private right of action, it affirmed the trial court’s dismissal of Ms. Hardy’s lawsuit.

To read the Court’s unanimous opinion in Kim Hardy v. TPC Southwind, authored by Justice Holly Kirby, go to the opinions section of TNCourts.gov.