Halting Employers’ Improper Attempts at Subsidizing its Payroll with Employees’ Tips

By Scott C. Adams | Employment Law Attorney
Published: August 6, 2015

Under the Fair Labor Standards Act (“FLSA”) and the Florida Minimum Wage Act (“FMWA”), an employer must pay its employee a minimum wage.  That wage may include the employee's tips. That is, an employer may pay an employee a cash wage below the minimum wage (but above $2.13), so long as the employer supplements the difference with the employee's tips; this is known as an employer taking a “tip credit.” The employer may only take a “tip credit” toward the minimum wage if the employer informs the employee of the FLSA's tip provisions. Additionally, if an employee receives tips pursuant to a tip pooling system, the tip pool may only include customarily tipped employees. Courts have focused on the extent of an employee's customer interaction as a significant factor in determining whether the employee is a customarily tipped employee.  A tipped employee is defined by the FLSA as an “employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” Unfortunately, many employers attempt to include employees in the “tip-pool” that should not be included in order to improperly obtain the benefit of the tip-credit for such employees and therefore subsidizing its payroll with the tips of the employees.  Such actions are detrimental to the well-being of workers and taxpayers.

Where an employer takes the tip credit in connection with a tip pooling arrangement, the application of the tip credit will only be valid so long as the pool includes only those employees who customarily and regularly receive tips. The requirements of the tip credit are strictly construed against the employer.  The Legislative history of the FLSA and Department of Labor interpretations make clear that employers should not require tipped employees to share their tips with employees who do not customarily and regularly receive tips. In a Senate Report on the 1974 amendments to the FLSA, the Senate Committee on Labor and Public Welfare explained that “the employer will lose the benefit of [taking a tip credit] if tipped employees are required to share tips with employees who do not customarily and regularly receive tips—e.g., janitors, dishwashers, chefs, laundry room attendants, etc.” S.Rep. No. 93–690, at 43 (1974).

Unfortunately, many employers attempt thwart this law in order to cast upon employees the burden of paying its workforce by utilizing the tips obtained by tipped employees to subsidize the wages owed by the employer to employees who do not customarily and regularly receive tips.  Recently, the Employment Lawyers at Labar & Adams represented a class of such tipped employees.  After litigating the matter extensively and convincing the Employer that its tip-pool was questionable, the Employer agreed to pay the tipped employees the wages that they were rightfully entitled too.

If you know of someone that participates in a “tip pool,” there may be an issue of whether they are being paid appropriately.  Such persons should contact an Employment Lawyer to have their situation evaluated.

The Orlando Employment Lawyers at Labar & Adams handle the full range of Plaintiffs’ employment issues, to include Title VII (discrimination), FLSA (overtime/minimum wage), FMLA (medical leave), USERRA (service member retaliation), ERISA (health & retirement plan issues), COBRA (health coverage issues), ARRA (medical benefit issues), FCRA (discrimination), Whistle-Blower Claims, Worker’s Compensation Retaliation, Unemployment, Unpaid Wages, etc. 

If we can be of service to you, your clients, friends, or family, please do not hesitate to contact us at 1-866-680-4LAW or fill out our online form located at the top of the page and we will contact you shortly.

 

Scott Adams - Employment Lawyer

 

 

 

 

 

Scott C. Adams
Employment Law Attorney

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