Service Industry and Tipped Employees

Restaurant workers and tipped employees, as a group, are frequently subjected to wage and hour violations by employers who misunderstand, or misapply the law and pay tipped employees less than they are entitled. These violations are usually not isolated incidents, but occur repeatedly over time and often affect large groups of people, such as the entire wait staff at a restaurant. At the Law Offices of J.J. Talbott, our labor and employment attorneys help workers in Florida and Alabama recover for unpaid wages when tip rules and other wage laws are violated.

Minimum Wage Violations of the Tip Credit Rules

Employees who work for tips are entitled to be paid the minimum wage, which is currently $7.25 in Alabama (the federal minimum wage), and $8.05 in Florida. However, for employees who customarily and regularly receive more than $30 a month in tips, the employer is allowed to consider the employee’s tips as part of their wages and count them as a “tip credit” against the minimum wage. Even when claiming the full tip credit, however, employers must still pay a direct wage to the employee of at least $2.13 per hour (Federal Minimum Wage) and $5.03 per hour under the Florida Minimum Wage for the year 2016.

The tip credit rules can be confusing and difficult to follow. For instance, for a worker who waits tables and washes dishes as a dishwasher, the tip credit can only be applied to hours spent waiting on tables. Yet the tip credit can apply to hours spent by servers setting up and cleaning tables, making coffee, and even washing the occasional glass, even though they are not receiving tips during that time, as long as not more than 20% of their workweek is spent in these non-tip-producing activities.

When an employer fails to inform workers of these tip provisions, or violates the Fair Labor Standards Act, the employees are entitled to be paid the full minimum wage in addition to an equal amount of liquidated damages.

Common Tipped Employee Wage Violations:

1) Failure to Provide Notice to the Tipped Employee

The employer must provide the following information to a tipped employee before the employer may use the tip credit:

  1. the amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour under federal law ($5.03 under Florida law);
  2. the additional amount claimed by the employer as a “tip credit,” which cannot exceed $5.12 under federal law (the difference between the minimum required cash wage of $2.13 and the current federal minimum wage of $7.25) (In Florida, the employer cannot claim more than $3.02 as “tip credit). Thus, if the employee worked over 40 hours in a week, the employee is still entitled to overtime, but the employer is still limited as to the amount of tip credit that they can take.
  3. the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
  4. all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and
  5. that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

The employer may provide oral or written notice to its tipped employees informing them of items 1 – 5 above. An employer who fails to provide the required information cannot use the tip credit provisions and, therefore, must pay the tipped employee at least $7.25 per hour in wages (under federal law) and allow the tipped employee to keep all tips received.

2) Forced Participation in a Tip Pool that Includes Non-Tipped Workers Such as Dishwashers or Managers

Employers can require tipped workers to participate in a tip pool.  However, the tip pool can only consist of employees of those who customarily and regularly receive tips such as waiters, waitresses, bussers, bartenders, and barbacks. The tip pool cannot include those who do not customarily and regularly receive tips such as dishwashers, cooks, chefs, janitors, bouncers, and managers. If non-tipped employees are included in the tip pool, this destroys the ability of the employer to take the tip credit and the employee would be entitled to the full minimum wage, and not just the tip credit.

3) Claiming the “Tip Credit” for All Hours Worked When an Employee Sometimes Works as a Tipped Employee and Sometimes Does Not

When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a cook and a waiter, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing. However, when a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties.

4) Employer failing to keep records of tips received

Employers electing to use the tip credit provision must be able to show that tipped employees receive at least the minimum wage when cash wages and the tip credit amount are combined. If an employee’s tips combined with the employer’s direct (or cash) wages of at least $2.13 per hour/$5.03 in Florida do not equal the minimum hourly wage, the employer must make up the difference.

5) Employer failing to pay employee for Overtime

Employers electing to use the tip credit must still pay overtime to employees that work over 40 hours in a work week. This overtime wage payable by the employer must be at least 1.5 times the minimum wage minus the allowable tip credit.

6) Taking deductions from payroll for breakage or customers refusing to pay

Employers often deduct monies from the payroll of tipped employees for broken dishes or when customers skip out on their bill. Forcing the tipped employee to pay for these items often takes their pay below allowable tip credit and is a violation.

7) Allowing the employee to work for tips only

As noted above, The Fair Labor Standards Act requires the employer to pay the employee at least the minimum wage for the applicable tip credit. Often, employers will allow an employee to work for only tips, and the employee is not paid any wages from the employer. This is a violation of the Fair Labor Standards Act and would entitle the tipped employee to the full minimum wage plus an equal amount of liquidated damages.

If you believe you may have been wrongly paid, you may be entitled to unpaid wages plus liquidated damages. Call the attorneys at the Law Office if J.J. Talbott for a free confidential consultation today at (850) 437-9600, or contact us over the web at Chat now.