Wage And Hour Lawyer’s Best Answers: Is tip pooling legal? If there is a tip pool, how can my employer use my tips? How much does my employer have to pay me per hour if I receive tips as part of my pay?
Philadelphia sports bar Chickie’s and Pete’s has agreed settle a wage and hour lawsuit by paying current and former employees over $6.8 million in back wages and damages stemming from a massive, multi-year investigation, which revealed that the company was using an illegal tip pooling scheme to steal tips from its servers. The details highlight the conditions many in the serving industry work under.
Chickie’s employees referred to the company’s tip pool arrangement as “Pete’s Tax.” If your employees call one of your business practices a “tax” it may be time to review your business’ operations. Under the tip pooling scheme management routinely docked two to four percent of a server’s total table sales. The restaurant then illegally kept sixty percent of this “tip pool” while only giving forty percent to bartenders on duty—which is legal.
To add insult to injury, the company expected servers to pay the “tax” in cash at the end of every shift—even for tips on credit cards and not in cash! Often servers were forced to borrow cash from their fellow employees or had to go to the ATM to take money out of their own bank accounts. Chickie’s also decided to only pay its servers and bartenders a $15 per shift flat rate, didn’t pay overtime, required employees to attend mandatory meetings and training on their own dime, and made employees pay for their uniforms. Of course, all of this is illegal under the Fair Labor Standards Act (“FLSA”), as our wage and hour attorneys have blogged before
Under the FLSA employers must pay nonexempt employees at least $7.25 per hour plus time and one-half their regular rate of pay for all hours over forty they work per week. Tips belong to the employee who earned them. Employers have no right to tips. But, an employer can claim a credit based on the tips and use it to fulfill its obligation to pay the full minimum wage to tipped employees. The employee’s tips plus direct wages paid by the employer must equal the minimum wage for the pay period. If there’s a gap the employer must fill it. An employer using the tip credit only has to pay its tipped employees $2.13 per hour (remembering it must fill in any gaps should the employee not earn the minimum wage).
As far as tip pooling agreements go, generally, they’re not illegal but there are strict limitations. The DOL has explained that employers must inform employees about any tip pool contribution, can only retain a tip credit for the amount of tips a tipped employee receives, and can’t keep any of the tips for any other reason.
Chickie’swasn’t filling in the gap to ensure employees earned at least the minimum wage and wasn’t paying the meager $2.13 per hour they owed them because the $15 per shift flat rate didn’t equal the minimum whenever a shift went over seven hours. As mentioned above, Chickie’s was actually pocketing most of the tips. As if that wasn’t enough, the company also decided not to pay overtime.
If you are in the serving industry and think your employer is illegally taking your tips and not paying you at least the minimum wage you may want to contact a wage and hour attorney to make sure your rights under the FLSA aren’t being violated.
Are you a waiter, waitress, server at restaurant that depends on tips to live? If you are a tipped employee and believe that your employer is not paying you all of your wages for all of your lawfully earned time or taking part of your tips or participating in the tip pool as prohibited under the Federal Fair Labor Standards Act or Ohio Fair Labor Standards Act, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at Spitz, The Employee’s Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call 866-797-6040.
The materials available at the top of this tipped wage violation, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Can my boss take my tips?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of Spitz, The Employee’s Law Firm, Brian Spitz, or any individual attorney.