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Minimum Wage Rights of Tipped Employees

Many restaurants violate the minimum wage rights of tipped employees by abusing the “tip credit.” Here’s how.

What is the Tip Credit?

Under the Fair Labor Standards Act (FLSA), the federal minimum wage is $7.25 an hour. The FLSA allows an employer to take a “tip credit” of up to $5.12 an hour for a “tipped employee,” such as servers (waiters or waitresses). In other words, the employer is allowed to pay the employee $5.12 less per hour when the employee earns tips. If the employer takes a tip credit, the employer must make sure the tipped employee earns at least $7.25 per hour in combined wages and tips during any work week. Even if the employee’s weekly combined wages and tips amounts to at least $7.25 per hour, the employer might violate the FLSA in other ways.

Minimum Wage for Restaurant “Side Work”

Federal courts have determined that a tipped employee is entitled to the full minimum wage for work when there are no customers to serve. Thus, if the tipped employee does food prep, cleaning, daily accounting or other “side work” before the restaurant opens or after it closes and the customers have left, the employee is entitled to the full minimum wage of $7.25 per hour for such work time. For example, if an employer takes a tip credit of $5.12 per hour during a work week when the employee worked 5 hours when no customers were present, the employee is entitled to an additional amount of $25.60 in minimum wages (the $5.12 tip credit multiplied by 5 hours). If such minimum wage violations occurred over 100 weeks, the unpaid minimum wages would amount to $2,560.

Moreover, if a tipped employee spends more than 20 percent of his or her work time during a work week in non-tip producing “side work” (cooking, cleaning, food prep, rolling silverware, etc.), the employer must pay the tipped employee the full minimum wage of $7.25 per hour for all such non-tipped work. For example, if an employer takes a tip credit of $5.12 per hour during a work week when the employee worked 30 hours and spent 40 percent of his or her time performing non-tipped side work, the employee is entitled to an additional amount of $61.44 in minimum wages (the $5.12 tip credit multiplied by 12 hours). If such minimum wage violations occurred over 100 weeks, the unpaid minimum wages would amount to $6,144.

Are you Required to Participate in Tip Pooling?

Also, FLSA regulations impose strict requirements regarding “tip pooling” in order for the employer to take its “tip credit.” If the employer requires a tipped employee to share tips with the restaurant itself, managers, or “back of the room” employees who do not interact with customers (such as cooks, dish washers or expediters), the employer loses its right to the tip credit, and must pay the affected tipped employee the full minimum wage of $7.25 per hour for all affected work hours. For example, if the employer takes a tip credit of $5.12 per hour for a tipped employee who is required to share tips in an unlawful tip pool that affected each work shift during a work week when he or she worked 30 hours, the tipped employee is entitled to additional minimum wages in the amount of $153.60 for the week. If such minimum wage violations occurred over 100 weeks, the unpaid minimum wages amount to $15,350.

In most cases, the FLSA provides for “liquidated damages” (i.e. double damages) to the employee as a penalty for the employer violating the employee’s minimum wage rights.

Lastly, the FLSA includes a mandatory “fee shifting” provision in favor of employees. That is, if an employer is found liable for an FLSA violation, the employer will be required to pay the employee’s reasonable attorneys’ fees, on top of the FLSA damages. Thus, in addition to FLSA damages, the employer could be ordered to pay costs and hourly attorney’s fees to the employee’s attorney is an amount several times more than the underlying FLSA claim. This “fee shifting” provision in the FLSA creates enormous incentive for an employer who violated to the FLSA to settle the matter short of extensive litigation.

Our Kansas City Employment Attorneys Can Help

If you have worked as a tipped employee and you believe your FLSA rights have been violated, you should contact Brady & Associates. The law imposes a two-year or three-year time limit on asserting FLSA rights. If any of the work for which you want to assert an FLSA violation occurred at least two years ago, your claims could be diminished for each week you wait to assert your rights.

Based in Overland Park near Kansas City, we represent employees in Kansas, Missouri, and throughout the United States.

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