Former Prive workers blast handling of tips

By Liz Benston (contact)
Monday, Aug. 10, 2009 | 2 a.m.

Former employees of the beleaguered Prive nightclub have spilled juicy stories of how management condoned drug use, allowed pimps into the club and entertained VIPs with drugs and strippers in a backroom called “Table 69.”

One major reason why they’re talking: They’re unhappy with how the club handles the distribution of workers’ tips.

The club is a tenant of Planet Hollywood, which was fined $500,000 by the Nevada Gaming Commission last month for allowing illegal acts on its property. Clark County denied the club’s liquor license, forcing it to close. The club has appealed.

Tips are a sensitive subject on the Strip: Witness the dispute between dealers and Wynn Las Vegas over the casino’s decision to have dealers share tips with their immediate supervisors.

Prive workers say they quit the club because management — which counts and splits employee tips behind closed doors — unfairly swiped a big chunk of tip money that should have been returned to workers.

It’s a damning allegation in a town where so many depend on tip income. Employers who allow management to dip into the tip pool are demonized in Las Vegas, where employers generally follow a time-honored practice of letting employees count their tips before the employer distributes them to the rank and file.

At Prive, former employees say, management counts the tips and distributes them based on undefined performance measures.

Years ago casino employees typically received envelopes of cash at the end of their shifts. Many employers, wary of Internal Revenue Service audits, corruptible managers and employee squabbles, have abandoned the practice in favor of distributing printouts showing what each worker received in tips and payroll stubs that report tip earnings. Still, some Las Vegas businesses, including Prive, do things the old-fashioned way.

These former employees say their cash envelopes typically contained a fraction of the tips they turned in at night’s end because, according to managers, their co-workers didn’t generate as much in tips. Because management counted the tips behind closed doors, former employees say they had no way of determining whether the tips they received accurately represented their share. They believe top executives simply pocketed the tips — a practice that is frowned upon, if not illegal.

Prive spokeswoman Vanessa Menkes acknowledged in an e-mail that managers keep a portion of employees’ tips, which she said is common in Las Vegas.

Some nightclub operators disagree, saying it alienates workers.

Menkes said the club’s tip-pooling policy is proper because employee tips are “collected by the staff and the totals are verified by management prior to distribution. The staff is required to stay and observe the verification process prior to the monies being distributed based on the tip pool distribution system. The staff is required to report 100 percent of tips earned in compliance with IRS statutes.”

Gaming regulators who investigated the club’s practices are aware of the tip allegations — and the underlying assumption that executives aren’t reporting their tip windfall to the IRS — but say they have not been able to prove anything.

Ex-employees are mobilizing heavier artillery against Prive — accusing top management of devising the same tip confiscation scheme that led to last year’s well-publicized IRS raid of nightclub operator Pure Management. Prive’s top management came from Pure, which was raided months after managers left to open Prive.

Menkes said that allegation is “100 percent untrue, and clearly instigated by disgruntled former employees.” She added that the two managers who are the target of most of the former workers’ complaints are no longer employed by the nightclub.

(No arrests or charges have been made as a result of that investigation, and the IRS has declined to comment. Gaming regulators say the IRS has not shared any of its information with Nevada officials.)

Gaming regulators have historically taken a hands-off approach to employment disputes such as those involving the pooling and distribution of tips, along with other issues for which primary regulatory jurisdiction rests with another government agency, such as the Nevada Labor Commissioner and the IRS.

Even so, Gaming Control Board member Randall Sayre said regulators are on notice.

“The board is concerned anytime there is potential criminal conduct going on. There’s a tremendous amount of money involved in these clubs. If you’re going to be engaged as an employer, (tip pooling) is one of the issues you should take a look at.”                                       [up]