One of the most common questions the attorneys at the Wage Authority Group receive is why servers, bartenders, and other tipped employees make so little in wages. While federal law mandates a minimum wage of $7.25 per hour, employees who receive tips only have to be paid $2.13 per hour, as long as their tips bring their income for the week above $7.25 per hour. This pay system is generally known as the “tip credit.”
The tip credit makes sense for workers who frequently engage with customers and receive tips. But the savings restaurants get by paying only $2.13 per hour often leads them to apply the “tip credit” for work that is properly compensated under the full minimum wage.
Tipped v. Non-Tipped Employees
Under the Fair Labor Standards Act, employers can only pay the tip credit to employees who are engaged in a traditionally tipped occupation, such as server and bartenders. On the other hand, employees who do not engage with customers, such as cooks, dishwashers, and janitors, do not qualify as tipped employees, and must be paid the full minimum wage.
To avoid paying the full minimum wage to non-tipped employees, restaurants often require their tipped employees to perform work ordinarily assigned to those positions. The Department of Labor has ruled that employers cannot rely on this practice to avoid paying the full minimum-wage for non-tipped work. Workers employed in “dual jobs,” e.g. as a server and a janitor, can only be paid the reduced tip credit wage for the hours worked as a server.
The 20% Rule
Side work is an unfortunate reality of working as a tipped employee. For workers who depend on tips for their livelihood, it can be frustrating to spend your time on work that does not directly lead to tips, such as setting tables, re-stocking supplies, and cleaning the service areas. Recognizing that side work does not directly lead to earning tips, the DOL uses to “20 % rule” to assess when a tipped employees’ side work becomes so excessive that he or she is entitled to the full minimum wage.
Restaurant workers should carefully assess whether their employers are in compliance with the 20% rule. Many large restaurant chains, such as Applebee’s, TGI Friday’s, and Buffalo Wild Wings, have faced class action lawsuits claiming violations of the 20% rule.
Tip-Pooling with Non-Tipped Employees
Another way in which restaurants improperly claim the tip credit is by requiring tipped employees to pool or share their tips with employees who did not engage with customers, such as cooks, dish washers, and expeditors. This also violates the Fair Labor Standards Act, which provides that employees can only be required to share their tips with other employees whose duties regularly involve customer interaction. If you are required to pool or share your tips, you should understand who is receiving them and whether they qualify as a tipped employee under federal law. If not, you and your co-workers may be owed unpaid wages.
Image link: https://www.pexels.com/photo/blur-breakfast-chef-cooking-262978/