Spitz, The Employee’s Law Firm

Wage: Tipped Employees

Wage: Tipped Employees

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Our lawyers focus to fight for the rights of tipped employees. For many workers – waiters, waitresses, servers, bartenders, and valets, for example – tips are their primary source of income. You will likely be considered a tipped employee if you customarily and regularly earn more than $30 each month in tips.

If you are a tipped employee, your job can pay tipped employees less than the minimum wage. However, the Fair Labor Standards Act (FLSA) and Ohio wage laws set out several rules that employers must follow when employing tipped workers. Under the FLSA and Ohio laws, your employer can take a maximum tip credit against the minimum wage. While the FLSA provides that an employer can take up to a $5.12 maximum tip credit against the federal minimum wage of $7.25, Ohio law requires employers that have at least $297,000 in gross sales to pay a minimum wage of $8.10 per hour while taking only a $4.05 maximum tip credit. This means that most tipped employees in Ohio must be paid a minimum cash wage of $4.05 per hour as long as your tipped income makes up the full difference up to least to the level of the federal- and state-required minimum wages.

Now, your employer can only take the tip credit for the work that you, as a tipped employee, are doing in a historically tipped role. For example, if your boss makes tipped employees come in on a Saturday morning before the restaurant opens to polish the silver or scrape gum off the bottom of tables, you should be paid at least the full minimum wage.

Importantly, your job can only apply tips that you actually got toward the tip credit applied to the minimum wage. So, if you are working in a slow diner and only got $10 in tips over a five-hour shift, your job can only take a $2 per hour tip credit – meaning your job has to pay you the minimum hourly wage less $2 per hour for all hours worked.

While tips may be used in some circumstances as a credit toward your employer’s obligation to pay tipped employees minimum wage obligation, your job cannot use your tips for any other reason, with the possible exception of making you pay credit card fees on your tips. Your tip is exclusively your property. The FLSA expressly makes it unlawful and will void any contract or agreement between an employer and a tipped employee agrees to share any portion of the tip with the employer or owner of the business. For instance, even in situations where an employee is paid the full minimum wage, there can be no agreement or other arrangement where the tipped employee has to turn over any portion of tipped income to the employer or owner of the company.

Now, that being said, the FLSA legal requirement that tipped employees must retain all their tips does not prevent your job from setting up a tip pooling, but the tip pool also has requirements to be allowed. Under these requirements, your boss/job: (1) must notify you and all tipped employees of any required tip pool contribution amount; (2) just like straight tips, can only take the tip credit against the minimum wage for actual tips that you ultimately get; and (3) just like straight tips, cannot keep any of the tips from the tip pool. If you have to share money from the tip pool with any typically nontipped employees such as cooks, dishwashers, managers or even the owner, the tip pool becomes invalid and your employer cannot take a tip credit at all. This means that you would be entitled to the full minimum wage in your paycheck and would still get to keep all of the tips that you kept.

If you are a tipped employee, make sure you know your rights so your employer is not in violation of the FLSA. If you find yourself saying any of the following, you should call a wage and hour attorney immediately about a possible wage theft claim:

  • My boss is stealing my tips.
  • My manager is sharing in our tip pool at the restaurant.
  • I have to share my tips with the cook.
  • I was forced to pay for dine and dash losses out of my tips.
  • The restaurant that I work at makes me do an hour of kitchen prep work before and after my serving shift but still pays me at server rate for those hours.
  • The owner of the bar that I work at tends bar and takes tips out of the tip pool.
  • My supervisor makes me give tips to the dishwashers.
  • I’m not making minimum wage even after I get all my tips.
  • What should I do if my job says I got more tips than I actually got?
  • My paycheck is wrong.
  • I don’t get to keep all of my tips.
  • I am a tipped employee and want to sue for wage violations at the bar that I work at.

Thus, an employer cannot make any deduction based on a dine and dash, breakage or any other reason that results in the employee’s wages being less than minimum wage for the given pay period. The restaurant or bar cannot avoid a violation even if the employee’s tips were high enough to still keep their full pay rate at or above the minimum wage after the employer makes a deduction based on a dine and dash. The simple principle here is that under federal law, tips belong to the employee, not the employer.

Tipped Employee Frequently Asked Questions

The line between a wage and tips can be blurred by employers looking to cut corners. Click on any of the questions below to find answers to some of the more popular questions Spitz, The Employee’s Law Firm sees on a regular basis:

 

Am I A Tipped Employee? Am I Subject To The Tip Credit Being Taken Out Of My Paycheck?

There are many different tipped employees, but the most common examples are waiters, waitresses, servers, bartenders, and valets. Again, under the FSLA, you would be considered a tipped employee if you customarily and regularly earn more than $30 a month in tips. By contrast, non-tipped employees are those who are paid at least minimum wage and do not interact with customers.

Can My Boss Take A Tip Credit Without Telling Me? When Do I Have To Be Told That My Job Is Going To Use The Tip Credit To Pay Me Less?

One problem that many employers find themselves in is failing to provide notice that the employer intends to take a tip credit towards its obligation under the FLSA to pay its tipped employees minimum wage. An employer is required to provide written or oral notice to tipped employees of the following:

  1. The cash wage that your employer is paying you,
  2. the additional amount claimed by the employer as a tip credit,
  3. that the tip credit cannot be higher than the number of tips actually received,
  4. all tips received by tipped employee are to be retained by employee, except for when there is a valid tip pooling agreement
  5. the tip credit will not be applied unless the employee was informed of all of the above.

If the employer fails to inform the tipped employee of all of the above, the employer must pay the employee at least the higher of the federal minimum wage of $7.25 per hour or the Ohio minimum wage of $8.10 per hour, and tipped employee may still keep all tips.

Can My Job Force Me To Share Tips With Other Employees? Do I Have A Choice Whether Or Not To Be In A Tip Pool?

Another very common question tipped employees have is whether or not their tip pooling arrangement is valid. In many restaurants, tipped employees must give a portion of their tips to other restaurant staff members. The idea behind tip pooling arrangements is that many members of the restaurant staff contribute to the service of the restaurant’s customers, so they should also share in the tips.

Under a valid tip pooling agreement, the tipped employee should only be required to share his or her tips with other employees who customarily and regularly receive tips. So, what restaurant employees, other than servers and bartenders, customarily and regularly receive tips?

Many courts address this by asking two questions: (1) is the employee in the tip pooling arrangement paid less than minimum wage; and (2) does the employee in the tip pooling arrangement interact with customers? If the answer to either question is “no” then the tip pooling arrangement is not valid. Courts focus on the extent of interaction with customers. Servers, hostesses, bussers, and service bartenders are viewed to have sufficient interaction with customers.

Dishwashers, cooks, and janitors are not. Tip pooling arrangements that include employees without sufficient interaction with customers are not valid. Once a tip pool becomes invalid, you must be paid the full minimum wage and can still keep your tips.

Can My Manager Or The Owner Share In The Tip Pool? Do I Have To Give Part Of My Tips To My Boss Or The Manager If He Or She Also Bartends?

No. Recently, the United States District Court District of Maryland in Gionfriddo v. Jason Zink, LLC, considered these same questions. In that case, Defendant Jason Zink was the owner of two restaurants and was sued by several of his employees claiming that Zink improperly participated in the tip pool. In response, Zink asserted that he could participate in the tip pool because he was the primary bartender at each bar. Zink argued that bartenders are commonly considered tipped employees under the FLSA. But, the Court rejected this argument, holding that because Zink was considered an “employer under the FLSA, he could not possibly also be considered a tipped employee who could share in a tip pool … this Court need not evaluate the extent of Mr. Zink’s bartending activities because it would be [contrary] to the purpose behind the FLSA to simultaneously allow him to take tips from a collective tip pool that was set up to allow him to pay his employees at a rate substantially below the minimum wage.”

As such, Zink’s participation in the tip pool was unlawful under the FLSA and resulted in the tipped employees being entitled to full minimum wages. The Gionfriddo decision is not alone in holding that an owner or other manager cannot be part of the tip pool. As the Gionfriddo Court recognized, “every court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participating in employee tip pools.”

Can I Be Forced To Pay For Customers That Walk Out Without Paying? Do I Have To Use My Tips To Pay For Dine And Dash Customers Or Broken Dishes?

The Department of Labor (“DOL”) has explored this issue and responded as follows: “Where deductions for walk-outs, breakage, or cash register shortages reduce the employee’s wages below the minimum wage, such deductions are illegal. Where a tipped employee is paid $2.13 per hour in direct (or cash) wages and the employer claims the maximum tip credit of $5.12 per hour, no such deductions can be made without reducing the employee below the minimum wage (even where the employee receives more than $5.12 per hour in tips).”

 

Talk to an Employment Lawyer Today

Are you a waiter, waitress, or server at a restaurant who depends on tips to live? Know your rights as a tipped employee. If your employer has committed any of the above violations or if you have any other questions about how the FLSA applies to tipped employees, contact the employment law attorneys at Spitz, The Employee’s Law Firm, for a free initial consultation. If you believe that your employer is not paying you all of your wages for all of your lawfully earned compensation or is keeping your tips in violation of 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.

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