Approximately 10.8 million U.S. workers are employed in the Restaurant/Food Service industry.  Many of these workers rely upon tips for a substantial portion of their wages.  According to the Department of Labor, this sector of the workforce is regularly subjected to “persistent and serious” violations of the law. Tipped employees should know their rights under the Fair Labor Standards Act (“FLSA”).

 Who is a “tipped employee?”  A tipped employee is defined as an individual engaged in an occupation who customarily and regularly receives more than $30 per month in tips.  FLSA regulations identify several occupations that are traditionally considered tipped occupations: waiters/waitresses, bellhops, counter personnel who serve customers, busboys/busgirls, and service bartenders.  Although this list is not exclusive, the regulations also list several occupations that are not considered to be tipped occupations:  janitors, dishwashers, chefs, cooks, and laundry room attendants.

How do employers benefit from employing tipped employees?  Under the FLSA, an employer may utilize a tip credit to pay tipped employees a direct wage less than minimum wage.  The tip credit is defined as a legally permitted portion of the statutory minimum wage that an employer is excused from paying because its tipped employees have earned a certain amount of money in tips.  This explains why many restaurant/food service workers are paid $2.13 per hour.

Common Wage and Hour Violations Arising From Tipped Employees.

Improper Tip Pooling. Tip pooling is the practice of gathering gratuities or a partial amount of those gratuities received from customers in a central pool for distribution to other employees.  Employers regularly violate the FLSA in this area.   Employers are not permitted to receive any portion of a tipped employee’s collected gratuities.  If your restaurant owner, supervisor, manager, or assistant manager is sharing in a portion of your tips, the tip pool may be illegal.  Similarly, tipped employees cannot be required to share their tips with non-tipped employees; i.e. kitchen staff.  If you are required to share a portion of your tips with non-tipped employees, the tip pool may be illegal.

What are the consequences of an illegal tip pool?   In the event a tip pool is found improper, the employer is no longer eligible for the tip credit and must pay the tipped employees the balance of the minimum wage for all hours worked while contributing to the tainted tip pool.  Under the federal minimum wage, an employer could be liable for $3.02 for each hour worked by each tipped employee.   The FLSA also provides for liquidated (or double) damages, plus attorney’s fees and costs.

Other Claims Involving Tipped Employees.

            1.         Miscalculation of Overtime Rate.  If your employer pays overtime based on one and one-half times your sub-minimum direct wage—($2.13 per hour x 1.5 = $3.20 per hour), you may be entitled to overtime damages.  Your overtime rate of pay must be based upon the full minimum wage rate.

            2.         Failure to Pay Minimum Wage.  An employee must receive at least minimum wage ($5.85) when the direct wage ($2.13 per hour) and tips are combined.  Accordingly, if the actual tips made by an employee are less than $3.72 per hour, the employer is required to make up the difference and ensure that the employee receives the federal minimum wage.  If you are not making minimum wage--$5.85—when you combine your hourly pay plus tips, you may be entitled to damages.

If you are a tipped employee and believe that you are not being paid properly, you should contact an employment attorney with experience in wage and hour issues to learn whether you have a claim.

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