The Columbus Ohio Overtime Attorneys at Barkan Meizlish, LLP have extensive experience representing tipped employees and continue to investigate wage and hour violations in restaurants, bars, hotels, and other parts of the service industry in which employees receive tips.
Wage and hour violations often arise in this industry because employers fail to abide by the “tip-credit” requirements of the Fair Labor Standards Act (“FLSA”), which allow employers to pay less than minimum wage to tipped employees only under very specific conditions.
“Tipped employees” are those who customarily and regularly receive more than $30 per month in tips. Under the FLSA, employers can pay tipped employees at an hourly rate rate less than the federal minimum wage by crediting a portion of the employee’s tips received toward the required minimum wage. In order to do so, however, the employer must 1) inform the employee that it will be taking a tip credit and 2) may not take or retain any portion of the employee’s tips. 29 U.S.C. § 203(m). If an employer fails to comply with these requirements, it cannot apply a tip credit towards the employees’ wages, and must instead pay the tipped employee at least the full applicable minimum wage and allow the tipped employee to keep all tips received.
Common wage and hour issues surrounding pay and tips can include:
- Illegal Tip Pools. Under the FLSA, employers may require tipped employees to contribute a portion of their tips to a general pool to be shared with non-tipped employees. A valid tip pool, however, may not include employees who do not “customarily and regularly” receive tips. Nor will the tip pool be valid if management employees are participants. Employers must notify employees of any required tip pooling arrangements.
- Unpaid side work. If a tipped employee spends more than 20% of their time performing general side work, an employer may not take a tip credit for that time. Instead, the tipped employee must be compensated at the federal or state-established minimum wage, rather than the “tip credit” minimum wage.
- Overtime violations. Tipped employees are still entitled to receive overtime pay for all hours worked over 40 in a workweek. Employers can violate this provision by paying employees “straight time” wages, rather than 1.5 times their regular rate of pay, for overtime hours exceeding 40 per workweek. Other violations include failing to include all components of the tipped employee’s wages when calculating the regular rate for overtime compensation.
- Illegal deductions. In addition, employers often make deductions from employees’ wages in a manner that reduces their wages below the FLSA minimum wage, including deductions for breaks, uniforms, cash register shortages, and customer walk-outs.