You probably don't run a steakhouse. But that $21 million verdict against Perry's Restaurant can be more relevant to you than you realize.

In this week's video, I break down the lawsuit - and recent verdict. Specifically, in March 2026, a federal judge in Texas entered a judgment of over $21 million against Perry's Steakhouse & Grille - and against its CEO personally - in Curtin et al. v. Perry's Restaurants Ltd. et al., Case No. 1:22-cv-00027 (W.D. Tex.). The lawsuit centered around a tip pool that (according to the plaintiffs, and eventually the judge) wasn't legally structured. But the real story - the one that matters whether you manage a restaurant, a retail team, a hospital unit or a remote tech workforce - is about things you need to know as a manager, and the very expensive mess that can happen when an organization isn't compliant. 

Watch the video for the breakdown, and see below on what happened, and what your managers actually need to know.

What Happened at Perry's Steakhouse

Perry's Steakhouse is a fine dining chain with 21 locations across the US. Like many restaurants, they implemented a tip pooling policy: servers were required to contribute 4.5% of their net sales into a pool that was then distributed to other employees - people like setup staff and hosts.

On its face, the restaurant's reasoning can sound fair. Servers on busy Friday and Saturday shifts make more than those stuck with Tuesday lunch. Why not spread some of that around? The problem was in the details of who was receiving those pooled tips.

Under U.S. federal law - specifically the Fair Labor Standards Act (FLSA) - tip pooling can be legal, but only when tips are shared among employees who customarily and regularly receive tips. The roles that Perry's was distributing tips to - staff who came in before the restaurant opened to set up, or who occasionally retrieved a forgotten credit card from a guest - were not people who regularly received tips. 

Once the court found the tip pool was unlawful, an expensive chain reaction kicked in. Perry's had been paying its servers using a "tip credit" - a provision under federal law that allows employers to pay tipped employees as little as $2.13/hour (instead of the $7.25 federal minimum wage), on the assumption that tips will make up the difference. But an unlawful tip pool can invalidate the tip credit. Suddenly, Perry's owed the full minimum wage for every hour worked - plus the misappropriated tip amounts - plus damages.

And then it got worse.

The court found the violation was willful - meaning Perry's knew or should have known they were breaking the law. Why? Because this wasn't their first wage and hour lesson. Perry's had been subject to other litigation for more than a decade. An employee had previously raised a complaint about the tip pool with the National Labor Relations Board - and was allegedly fired afterward. The court pointed to these facts and said: you were on notice. And that means the damages get doubled.

The final tally: $3.4 million in unpaid minimum wages, $7.1 million in misappropriated tips, and $10.5 million in liquidated damages - with attorneys' fees still to be determined. The judgment was entered not just against the company, but also its CEO, individually. Perry's is appealing, but had to put up a bond in court in the meantime. 

Why this isn't just a restaurant story

As an employment lawyer, I've learned that pay-related lawsuits are among the most common employment claims there are. And they often don't start because someone set out to break the law. They start because a manager - or even senior leadership - made a decision that seemed logical and fair (or "the way it's always been"), without understanding what the law actually required.

Managers don't need to know everything about pay - but there are basics they need to know, no matter where their team is located around the world.

What Managers Need to Know About Pay Practices

1. Tipped employees and tip pools (US)

If you manage any employees who receive tips, this case is a direct lesson. Under the FLSA:

- You can only use a tip credit if employees are in a "tipped occupation" - one where they customarily and regularly receive more than $30/month in tips.

- Tip pools are legal, but only among employees who customarily and regularly receive tips. Back-of-house staff (cooks, dishwashers) and employees who primarily do non-customer-facing work generally cannot participate.

- If you're using a tip credit and your tip pool is found to be unlawful, you lose the tip credit retroactively - meaning you owe the full minimum wage for all those hours.

What managers should do: If your team involves tipped employees and any kind of tip sharing or pooling policy, don't assume someone else has vetted it. Flag it to HR or legal, especially if the policy was set up informally or hasn't been reviewed in a few years.

2. Minimum wage, overtime, and pay practices aren't just federal (US)

Federal law sets a floor, but many states and cities have higher minimum wages, stricter overtime rules and additional requirements. California, New York, Washington, and others have very different (and more protective) rules than the federal baseline. If you manage employees across multiple states, what's compliant in Texas may not be compliant in Colorado.

What managers should do: Know which state and local laws apply to your employees' work locations - not just where your company is headquartered.

3. Global pay practices: it gets more complex

If you manage globally, the complexity multiplies. Here are just some examples of pay-related areas that can vary dramatically by country:

- Minimum wage: Many countries have national minimums that change annually. Some, like the UK, even have tiers by age.

- Overtime: In some countries, overtime requires premium pay. In others, it's regulated by weekly or annual hour limits. In some, "overtime" as Americans know it doesn't exist in the same form.

- Mandatory bonuses and profit sharing: Countries like Brazil and Mexico have legal requirements around profit sharing and mandatory additional months of pay (like Mexico's "aguinaldo" — a legally required year-end bonus).

- Vacation and leave: Statutory minimums vary widely. Many European countries require 20–25+ days of paid leave by law.

- Notice periods: In many countries, notice periods on termination are legally mandated and significantly longer than what US employees are accustomed to. Violating these isn't just an employee relations issue - it's a legal liability.

- Deductions: What can legally be deducted from pay varies. The Perry's case was, in part, about a required contribution that reduced effective compensation below minimum wage - an issue that can arise in many forms globally.

What managers should do: If you're managing employees in other countries, treat payroll compliance as a legal matter, not just an administrative one. Especially if you have a dispersed team, ask your local HR or legal teams what you need to know about the laws where your team members are located.

Situations Managers May Actually Face - and How to Respond

Managers are often the first person an employee comes to with a pay concern. Here are example ways to handle situations - especially if you need to check with someone else.

Situation 1: An employee says "I don't think I'm being paid correctly."

In the moment:

- Listen. Don't dismiss or minimize the concern - even if you think you know how the pay was calculated.

- Don't speculate or explain how you think it works. You might be wrong, and anything you say could complicate things if you're not actually correct.

- Say something like: "Thank you for bringing this to me. I want to make sure this is addressed correctly. Let me connect with [HR/payroll] today so they can look into this with the right information."

What to do next:

- Escalate to HR or your payroll team promptly. Communicate that the concern was raised, by whom, and when.

- Pay is understandably important to employees, and if something needs to be fixed, it's better to do it sooner rather than later. 

Situation 2: An employee questions a deduction from their paycheck.

In the moment:

- This is not the time to say "oh, everyone gets that deduction." Get them to the right person.

- Say: "I want to make sure you have the right answer on this, not just what I might think. Let me loop in [HR/payroll] so they can walk through it with you."

What to do next:

This is especially important if the deduction relates to uniforms, damaged/lost equipment, or any deduction made to penalize someone - those areas have specific legal requirements and can trigger wage claims if structured incorrectly.

Situation 3: An employee raises a pay concern and then later seems to be struggling at work or faces discipline.

This is where managers need to be especially careful. In the Perry's case, an employee who raised a complaint was allegedly fired afterward - and the court used that as evidence that Perry's was on notice of the issue. Retaliation (or anything that looks like retaliation) after an employee raises a wage concern can be a separate legal violation that compounds the original problem.

What to do:

- Consider everything carefully and separately: the pay concern and any performance issues are separate tracks.

- Tell HR immediately if an employee who raised a pay concern is now potentially facing any kind of adverse action, so they can ensure the decisions are fair and reasonable.

The Bigger Picture: Why "We Were Trying to Be Fair" Doesn't Hold Up in Court

The Perry's leadership testified that they implemented the tip pool to help employees working less desirable shifts. The court heard them - and still found willful violations. That's because intent doesn't override legal requirements.

This is a hard (but important) truth for managers who genuinely care about their people. You can want to do right by your team and still be in violation of the law. The gap between intention and compliance is where litigation lives.

Closing that gap means three things:

1. Making sure someone with the right expertise has actually vetted your pay practices - not just assumed they're fine because they've been done this way for years.

2. Ensuring managers understand the basics of what employees are entitled to - not so they become compliance experts, but so they know when to ask and who to ask.

3. Creating a culture where employees can raise concerns without fear - because the alternative is that those concerns end up in federal court.

How to Get This Message to Your Managers

At Manager Method, we build manager training rooted in real-world experience - from topics like hiring and onboarding, to lessons from employment law experience — because understanding what the law requires isn't just for lawyers and HR professionals. Managers are often the people employees go to when they have questions, concerns, and complaints. The ones who know how to respond - and who to call - can not just save costly litigation, but also build and establish genuine trust with their teams.

We've built our leadership platform to help your organization's managers build their capabilities through on-demand learning and live cohorts that have real scenarios they'll face. If your organization wants managers who know how to handle the day-to-day situations that can become very expensive very fast, we'd love to give you a demo.

👉 Learn more at managermethod.com/hr