Austin bar accused of withholding employees’ tips

Employees sue saloon, claiming theft of $500,000 in gratuities.

A high-end downtown Austin bar where patrons routinely rack up tabs as high as $10,000 or more is being sued by several former employees who claim they didn’t receive all the tips they earned.

An Austin bar where patrons routinely rack up tabs in the thousands of dollars is being sued by former employees who claim they didn’t receive all the tips they earned.

In a lawsuit filed this week in U.S. District Court in Austin, Rio is accused of “blatant violations of federal wage laws, and for theft, conversion and unjust enrichment.”

Open just nine months, the bar is accused of shorting staffers more than $500,000 in tips.

Tom Watkins, an attorney for Nate Paul, who is listed as the bar’s owner in court documents, said Paul denies all the accusations made in the suit.

“In the end, the evidence will show my clients did nothing wrong,” Watkins said.

Paul is president, CEO and founder of Austin-based World Class Capital Group, which owns several high-profile downtown buildings, including the former Spaghetti Warehouse on West Fourth Street and the building at 601 Rio Grande St. where Rio is located. Before Rio moved

in, the building was the longtime home of Katz’s Deli.

Calling Rio a “corrupt enterprise,” the former employees accuse bar management of “misappropriating hundreds of thousands of dollars in tips paid by Rio’s extraordinarily generous highend clientele.”

They claim managers of the bar, known for its pricey bottle service and rooftop pool, have altered books, pressured employees to violate Texas Alcoholic Beverage Commission liquor laws, including serving alcohol after hours, requiring employees to work off the clock, paying less than minimum wage and threatening workers who don’t “play along.”

To reduce the amount of tips employees received, the suit claims gratuities were “artificially converted” into sales retained by the bar.

Rio opened in May 2013 and, in its first full month, sold an estimated $655,164 worth of beer, wine and mixed drinks, according to state records.

“Because Rio offers (among other beverages) bottles of liquor and champagne costing hundreds (or even thousands) of dollars each, a customer’s tab after visiting Rio often reaches four or five figures,” the suit states. “Indeed, some of Rio’s more wealthy patrons regularly accumulate and pay tabs of many thousands of dollars. In doing so, these patrons have directed that servers and bartenders (like plaintiffs) receive gratuities of several thousand or even tens of thousands of dollars.”

As an example, the suit claims Joe Liemandt, founder of Austin software firm Trilogy, left an $11,000 tip one night in August 2013, followed by another $10,000 tip later that night.

In a receipt from August 2013 filed along with the lawsuit, a customer racked up a tab of more than $17,000, leaving behind a tip of close to $3,000.

Tips were supposed to be distributed among the bar’s employees, the suit said, with servers getting 55 percent, busers 20 percent, bartenders 5 percent and the remaining 20 percent going to “the house.”

“Rio’s servers and bartenders, however, never saw the vast majority of these tips reflected on their paychecks or otherwise paid to them,” the suit alleges. “When questioned, plaintiffs were given evasive, inconsistent and varying explanations as to why such tips were not fully paid to Rio’s tipped employees, and why the ‘house’ was entitled to keep a portion of the tips.”

The lawsuit seeks class-action status, with the plaintiffs asking for actual and punitive damages, attorneys’ fees, court costs and pre- and post-judgment interest.