Olive Garden’s parent Darden accused of discrimination over tipping policies

Olive Garden’s parent company, Darden Restaurants, Inc., has been accused of violating the Civil Rights Act of 1964 with its tipping policies, according to recent reports.

On Tuesday, nonprofit group One Fair Wage filed a federal complaint against Darden, saying that since its tipped workers are paid less than minimum wage, they are subject to sexual harassment, bias and ultimately pay discrimination, The Washington Post reported.

Darden — one of the largest restaurant companies in the country — told FOX Business in a statement that the “allegations are baseless.”

“Darden is a values-based company built on a culture of integrity and fairness, respect and caring, and a longstanding commitment to diversity and inclusion,” the statement said.


Though One Fair Wage filed an Equal Employment Opportunity Commission (EEOC) complaint against one specific company, the organization hopes to end sub-minimum wage for all tipped workers, not just at Darden restaurants.

One Fair Wage has filed an EEOC complaint against Olive Garden’s parent company Darden Restaurants, Inc. (iStock)


Currently, the federal government allows tipped employees to be paid less than minimum wage — in some places, tipped workers are paid as little as $2.13 an hour, according to One Fair Wage.

According to the organization, allowing a sub-minimum wage means that women — particularly women of color — end up being paid less because of bias.


One Fair Wage reportedly decided to file the EEOC complaint against  Darden because it, along with the National Restaurant Association, have “actively lobbied to maintain the sub-minimum wage,” The Post reported.

“I am not saying that Darden is much worse than the rest of the industry,” One Fair Wage President Saru Jayaraman told The Post. “I’m saying they’re emblematic, and they’re a leader in maintaining these standards. I think what we’re filing today is very, frankly, symptomatic of the whole industry. It’s just that Darden is a particularly clear example of what this industry has not just tolerated, but perpetuated for too long.”


Darden spokesperson Rich Jeffers told FOX Business that the company has “one of the lowest turnover rates in the industry” and that its tipped employees earn more than $20 per hour on average.

“We have an industry-leading team member experience,” he said in a statement.

According to The Post, if the EEOC finds that the complaint “has merit,” One Fair Wage will be allowed to sue Darden in state or federal court.

Ticker Security Last Change Change %
DRI DARDEN RESTAURANTS INC. 100.74 -0.06 -0.06%


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Parent company of Olive Garden violates the Civil Rights Act with its tipping policies, activists say

Activists looking to eliminate the sub-minimum wage for tipped employees — a practice that they say keeps workers in poverty, encourages sexual harassment and leads to racial discrimination — are taking a new approach in their campaign to end the two-tiered wage system in America: They’re arguing the lower tipped wage, sometimes as little as $2.13 an hour, violates the Civil Rights Act of 1964.

The first test of this strategy arrived Tuesday. One Fair Wage, a national worker-advocacy group, filed a federal complaint against Darden Restaurants Inc., one of the largest hospitality groups in the country, alleging that the company’s practice of paying tipped workers a sub-minimum wage causes them to suffer more sexual harassment than non-tipped workers and leads employees of color to earn less in tips than their White co-workers. The practice, the group argues, violates Title VII of the Civil Rights Act, which “prohibits employment discrimination based on race, color, religion, sex and national origin.”

Rich Jeffers, a senior director of communications for Darden, which includes such national chains as Olive Garden and the Capital Grille, said “these allegations are baseless” in a statement to The Washington Post. “Darden is a values-based company built on a culture of integrity and fairness, respect and caring, and a longstanding commitment to diversity and inclusion.”

One Fair Wage pursued its latest legal strategy on tipping after discovering a research paper written by an attorney who was pursuing a graduate degree at Harvard Law School. The paper made the argument that the sub-minimum wage violates the Civil Rights Act, based on tipping research conducted by, among others, professor Michael Lynn of Cornell University’s School of Hotel Administration.

The paper “resonated so strongly with what we had heard from workers for so long,” said Saru Jayaraman, president of One Fair Wage and a graduate of Yale Law School. It also fit into the larger cultural movement of many Americans coming to grips with the country’s long history of racial inequality.

(Bruce Bennett/Getty Images)

The group decided to put the legal theory into practice by filing its complaint against Darden with the U.S. Equal Opportunity Commission. In the past, the organization has helped put forth successful ballot initiatives to eliminate the two-tiered minimum wage in several jurisdictions, including Michigan and Washington, D.C., only to have them undermined by legislatures and city councils. In 2018, the D.C. Council repealed Initiative 77, which passed with 55 percent of the vote and would have gradually eliminated the two-tiered system in the city.

“Obviously, it’s frustrating when legislators overturn the will of the people, not just in D.C., but in Michigan and Maine. We won it in all three places,” said Jayaraman. “I will say that the fact that we keep winning and the legislators have to keep overturning it should be a clear indication that there’s overwhelming public

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Olive Garden parent takes a COVID-related hit in key markets but here’s why analysts are upbeat



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Darden Restaurants

Olive Garden and other pieces of the Darden Restaurants Inc. business have taken a hit from the coronavirus pandemic, but upbeat analyst groups are raising their price targets after the company took measures, like simplifying menus, in order to adjust.

Darden (DRI) reported fiscal first-quarter sales of $1.53 billion, down from $2.13 billion last year and just below the FactSet consensus for $1.56 billion. Olive Garden same-restaurant sales were down 21.1%. Sales at Olive Garden were down 27.7% to $788.2 million, sales at Longhorn Steakhouse fell 16.3% to $376.8 million, and fine dining sales sank 38.9% to $83.1 million.

“Overall, capacity restrictions continue to limit their top-line sales, particularly in key high-volume markets like California and New Jersey where dining rooms were closed for the majority of the quarter,” said Chief Executive Eugene Lee on the earnings call, according to FactSet.

Read: Beyond Meat, Incogmeato, Impossible Foods up ante in plant-based meat market

Lee notes that Olive Garden has 100 restaurants in California alone. Overall, what’s going to make a difference to same-restaurant sales in the near future will be increased capacity.

“We need to get California back,” Lee said. “We need some other areas to increase their capacity from 25% to 50%. Once you get past 50%, as long as the six-foot rule is in place, you’re still not going to really be able to max out your dining rooms.”

Even getting the bar area back in certain area is an improvement, he said.

The “best” Olive Garden in the company’s lineup, the Times Square location in New York City, is a $15 million location, Lee said. Now that restaurant is only pulling in $2,500 per day.

On Sept. 30, indoor restaurant capacity up to 25% will be allowed.

“[T]his is going to probably be hard for you to believe but we have one restaurant that cost us 50 basis points in comps. That’s the Times Square Olive Garden,” said Lee. “You wake up every day and you’re $300,000 short just in that one restaurant.”

Still, Darden shares closed up 8.1% on Thursday. The stock is down 11.3% for the year to date while the S&P 500 index (SPX) has edged up 0.8% for the period.

“Like many restaurant companies, Darden has used the pandemic as an opportunity to reset its cost structure, streamline operational processes, and eliminate unpopular items from the menu,” writes KeyBanc Capital Markets analysts led by Eric Gonzalez.

See: Kraft Heinz stock upgraded twice with analysts upbeat about ongoing business transformation

“While capacity limitations might mean Olive Garden’s sales recovery lags the industry, Darden’s cost-cutting measures continue to outperform expectations, and we see a more favorable margin structure in the future.”

KeyBanc rates Darden stock overweight with a price target of $108, up from $102.

Darden’s Chief Financial Officer Ricardo Cardenas said on the call that streamlining the menu “more than offset” the cost of additional to-go packaging.

A number of research groups raised Darden’s price target, including

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Olive Garden Parent Darden Restaurants Just Reinstated Its Dividend

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Same-restaurant sales slid 28.2% at Darden’s Olive Garden chain.

Luke Sharrett/Bloomberg

Darden Restaurants

stock was rising in premarket trading Thursday, following the Olive Garden parent’s fiscal first-quarter earnings report. The company reinstated its dividend and returned to profitability, despite the headwind of Covid-19, and gave an upbeat forecast.

Darden (ticker: DRI) said it earned an adjusted 56 cents a share, on revenue that fell 28.4% year over year to $1.53 billion. Analysts were looking for Darden to earn just a nickel a share on revenue of $1.56 billion.

Same-restaurant sales slid 28.2% at its Olive Garden chain, 18.1% at LongHorn Steakhouse, and 39.1% at its fine-dining segment, which includes the Capital Grill.

Darden’s board of directors reinstated the quarterly cash dividend of 30 cents per share, for shareholders on record as of Oct. 9. The company also repaid a $270 million term loan in August, “given steadily improving cash flows in the quarter.” It said it has access to $1.4 billion of liquidity, including $655 million of cash on hand.

For the current quarter, Darden said it expects to earn between 65 and 75 cents a share on revenue of $1.685 billion; consensus estimates call for EPS of 37 cents on revenue of $1.77 billion

Darden shares were up 3.6% to $93.21 around 9 a.m. Eastern time even as

Dow Jones Industrial Average

futures fell 0.6%.

The quarter was much better than Darden—and analysts—had feared in June, when the company said it could break even or turn a small profit. At the time, consensus called for a 34-cent loss. So the better-than-anticipated profit—compared with a wide per-share loss in the prior period—is an obvious positive for investors.

Yet the market is likely just as pleased with the company’s dividend payment, as well as its decision to clear some debt, because that projects confidence about Darden’s capital position at a time when many peers are struggling.

Dine-in restaurants have largely been hit harder than fast-food and other delivery-oriented strategies, given their higher price points and many consumers’ reluctance to congregate indoors. Darden, though, has earned analyst praise for how it has handled Covid. While the stock is off more than 17% this year, it has more than tripled from its low this spring.

Write to Teresa Rivas at [email protected]

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