Tip notice, tip pool, and minimum wage violations under the federal Fair Labor Standards Act.
The Fair Labor Standards Act (the “FLSA”) makes special provision for “tipped employees,” defined as employees who “customarily and regularly receive more than $30 a month in tips.” 29 U.S.C. § 203(t). Employers may pay such employees a lower base hourly wage but only if their tips bring their total wage up to the minimum wage for each hour worked. This arrangement is known as a “tip credit.”
Federal regulations provide that an employer must inform its tipped employees, prior to taking a tip credit, of the following information:
- The amount of the cash wage that is to be paid to the tipped employee by the employer, which may not be less than $2.13 per hour.
- The additional amount claimed by the employer as a tip credit, which cannot exceed $5.12..
- The amount of the tip credit claimed may not exceed the value of the tips actually received by the employee.
- All tips received by the tipped employee must be retained by the employee, except for a traditional tip pooling arrangement limited to employees who customarily and regularly receive tips.
- The tip credit does not apply to any employee who has not been informed of these provisions by the employer.
The Department of Labor has issued a summary of all tip credit requirements. See Fact Sheet # 15, Tipped Employees Under the Fair Labor Standards Act.
What happens if an employer violates these requirements?
If an employer does not follow these requirements, it gets no credit. As a result, it must pay tipped employees the full minimum wage.
Importantly, an employer who uses a tip credit is prohibited from requiring tipped employees to share their tips with non-tipped employees. This includes kitchen staff (referred to as back-of-the-house employees).
Any employer who violates these requirements is liable to its tipped employees in the amount of the tip credit taken by the employer plus all such tips unlawfully kept by the employer. Additionally, the employer generally must pay an additional equal amount as liquidated damages plus reasonable attorney’s fees. 29 U.S.C. § 216(b).
State laws are frequently more favorable than the federal Fair Labor Standards Act for tip notice, tip pool, and minimum wage violations.
State laws may provide more protection than the FLSA.
For example, the District of Columbia has very robust laws protecting tipped employees. D.C. law has similar provisions for tip notice and tip pooling. However, D.C. law provides for greater damages for violations than federal law.
Specifically, D.C. Code § 32-1012 provides that any employer who pays any employee less than the wage to which an employee is entitled . . . shall be liable to that employee in the amount of unpaid wages and an additional amount of liquidated damages equal to triple the amount of unpaid wages. In other words, employees can receive their back wages plus an additional three times those wages plus attorney’s fees and costs.
If you believe your employer is violating these provisions, you may be entitled to compensation.
Contact us today to determine if you have a claim.