Tipped employees fall victim to wage abuse when bar and restaurant employers institute or allow unlawful pay practices.
For many waiters, waitresses, servers, bartenders, hosts, and banquet staff, customer tips are a significant part of their compensation. When employers take tip money away from those workers – robbing them of wages and overtime – they violate the Fair Labor Standards Act (FLSA).
Workers are considered “tipped employees” if they receive more than $30.00 in tips a month. Under the law, tips belong exclusively to the tipped employee, regardless of the amount, and an employer cannot use tips to offset compensation except in limited circumstance.
Some employers don’t abide by the law, however, and try to take tips away from their workers or use them to circumvent their compensation obligations. According to an alert issued by the U.S. Department of Labor, wage theft involving bar and restaurant tips can include:
- Improper Tip Credits – employers are required to pay tipped employees a minimum wage of $7.25 per hour, which can be achieved by paying workers at least $2.13 per hour in addition to tips. When the hourly wage combined with tips falls short of the $7.25 threshold, the employer must pay the difference and demonstrate that the employee has received the minimum wage. Failing to do so constitutes wage theft.
- Unlawful Tip Pooling – employers are permitted to implement tip pooling or tip sharing arrangements between workers who “customarily and regularly receive tips” though the employer must still meet its minimum wage obligation for each employee. In some cases, the restaurant or bar will force tipped employees to share tips with non-tipped workers, a violation of FLSA and state employment laws.
- Dual Tipped/Non-Tipped Job Responsibilities – bar and restaurant employees often perform both tipped work and non-tipped duties in their jobs, such as a waiter or waitress who not only serves patrons, but also sets tables, brews coffee, or attends menu reviews and staff meetings. Employers can only use tip credits for the hours devoted to tipped work, and may not take the tip credit if a tipped employee spends more than 20 percent of the workweek on non-tipped duties. Some employers ignore the distinction, wrongfully applying tips to minimum wage calculations, and cheating workers out of wage and overtime.
Restaurant employers also violate the FLSA by misclassifying hourly workers as “managers” to avoid paying overtime.
Class action lawsuits have been brought several U.S. restaurants including:
- Chuck E. Cheese’s
- Darden Restaurants (including Bahama Breeze, Longhorn Steakhouse, Olive Garden, Red Lobster, and other brands)
- Jimmy John’s
- Outback Steakhouse
- Red Robin
- Landry’s Restaurants (including Bubba Gump Shrimp Co., McCormick & Schmick’s, Morton’s Steakhouse, Rainforest Café, and other brands)
- TGI Friday’s