Kansas City Lawyers Representing Whistleblowers and Employees Nationwide

Legal Tips for Tipped Employees

Under a federal statute known as the Fair Labor Standards Act (FLSA), the federal minimum wage is $7.25 an hour. Under certain circumstances, the FLSA allows an employer to take a “tip credit” of up to $5.12 an hour for a “tipped employee.” If the employer pays the tipped employee at least $2.13 an hour and the tipped employee effectively receives at least $7.25 an hour in combined wages and tips during the pay period, the arrangement generally will comply with federal law (unless the employee worked more than 40 hours in the workweek, in which case a more complicated formula for the applicable overtime rate would apply). In many instances, however, restaurants fail to ensure that an employee’s wages plus tips during pay periods meet the minimum wage of $7.25 per hour. Such failure violates the FLSA, even if the employee’s wages plus tips during other pay periods would make up the difference.

The employer can lose the right to claim the tip credit if the employer uses an invalid “tip pool.” A tip pool is where tips during a shift are pooled and then distributed to employees. Only “tipped employees” may be included in a tip pool. The law defines “tipped employees” to include only employees who directly interact with customers in the dining area, such as servers, bartenders, bussers and hosts. Paying out part of a tip pool to employees who do not directly interact with customers in the dining area nullifies the employer’s right to the tip credit, entitling all employees participating in the tip pool to be paid $7.25 per hour by their employer. For example, some employers unlawfully include “expediters” in their tip pools. In many restaurants, expediters do not directly engage with customers, but perform “quality control” prior to food being served to customers, making sure that orders are filled correctly and plates are appetizingly presented. Some employers lose the right to take a tip credit by including cooks, dishwashers or other “back of the house” employees in a tip pool. Some employers lose the right to take a tip credit because the restaurant itself retains part of the tips, or its owners or its managers participate in a tip pool. If an employer pays tipped employees $2.13 per hour and maintains an invalid tip pool, all of the tipped employees are entitled to be paid an additional $5.12 by the employer for all of their relevant hours of work. Thus, if one such tipped employee worked 20 hours during a week, he or she could be entitled to be paid by the employer an additional $102.40 in minimum wages for that week (i.e. the $5.12 per hour tip credit for 20 hours of work).

Other violations of tipped employees’ minimum wage rights are more subtle. For example, if a tipped employee spends more than 20 percent of his or her work time in non-tip producing 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. Thus, if an employer pays a tipped employee $2.13 per hour over 30 hours a week, and the tipped employee spends 30 percent of his or her time (9 hours during the week) in non-tip producing work, the employer could be liable to the employee for unpaid minimum wages in the amount of $46.08 for that week (i.e. the $5.12 per hour tip credit for 9 hours of non-tipped work).

Also, some federal courts have held that work performed by tipped employees before or after any customers are being served, such as before the restaurant opens or after it has closed and the last customers have left, are entitled to the full minimum wage of $7.25 per hour for such work. Thus, for example, if an employer pays a tipped employee $2.13 per hour, and the tipped employee works 5 hours per week before the restaurant opens or after it closes and all customers have left, the employee could be entitled to additional minimum wages in the amount of $25.60 per week (i.e. the $5.12 per hour tip credit for 5 hours of non-tipped work).

Lastly, in most cases, federal law provides for “liquidated damages” (i.e. double damages) to the employee as a penalty for the employer violating the employee’s minimum wage rights. Thus, for example, the employee in the last example, who was shorted minimum wages in the amount of $25.60 for the week, could claim additional liquidated damages, with a total claim of $51.20 for that week.

If you have worked in a restaurant that you believe has violated your rights under the FLSA, you should contact an experienced FLSA attorney. 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 file a lawsuit.

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