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Waiters and Tipped Employees Often Shorted Pay

The Fair Labor Standards Act ("FLSA") provides that all non-exempt employees who work over 40 hours in a workweek are entitled to overtime pay at one-and-one-half times their regular hourly rate. 29 U.S.C. § 207. The FLSA also provides that all employees must be compensated a minimum hourly rate of at least $7.25 per hour. 29 U.S.C. § 206(a)(1)(C). However, each of these provisions is modified for tipped employees. A "tipped employee" is defined as a person who customarily and regularly receives $30 or more per month in tips. Generally, this includes waiters, valets, bartenders and similar professions. The modifications made for tipped employees have made things quite complicated for employers, to where both large chain restaurants like Chili's and small restaurants owned by world-famous chef Mario Batali have been alleged to violate the rules. If you are a tipped employee, here are a few things to keep in mind.

 The Employer Must Inform Tipped Employee of any "Tip Credit." While all employees are required to be paid minimum wage, the FLSA allows for employers to pay tipped employees $2.13 per hour (the "tip credit rate"), so long as the tipped employee continues to earn above the minimum wage of $7.25 per hour after tips are counted. The difference between the tipped employee's $2.13 rate of pay and the $7.25 minimum wage ($5.12) is called the "tip credit." For any pay period in which the employee's regular hourly rate, plus the tip credit, falls below $7.25 per hour, the employer must make up the difference. However, an employer may only take a tip credit if the employer has expressly informed its tipped employees it is doing so, and must allow those tipped employees to retain all the tips they receive. Tipped Employee's Overtime Calculations Must Include Tip Amounts. Overtime pay is calculated by taking an employee's regular hourly rate, and multiplying it by 1.5. A tipped employee working fifty hours per week is thus entitled to at least $398.80 per week [(minimum wage of $7.25 x 40 hours) + (overtime rate of $10.88 x 10 hours)]. Many employers mistakenly multiply the tip credit rate of $2.13 by 1.5 to calculate overtime, resulting in an overtime rate of $3.20 per hour. However, because tipped employees are entitled to an overtime rate of $10.88 per hour, the tip credit amount paid by an employer for overtime should be $5.76 ($10.88 minus the tip credit of $5.12), not $3.20. Only Tipped Employees May Participate in "Tip Pool." The FLSA allows tip pooling or tip sharing arrangements between employees who customarily and regularly receive tips. However, the employer may not use the tip pool monies for any other purpose than the benefit of its participants. Also, the tip pool may not be shared with managers, supervisors or other employees who are "back of the house" employees (dishwashers, cooks, kitchen staff, preparers, janitors, etc.). If employees other than waiters, bartenders, bussers or hostesses are eligible for money in a tip pool, the restaurant is likely in violation of the FLSA.The FLSA is violated all over the country by even the biggest of employers. If you think you may be owed overtime under the FLSA, contact an employment law attorney today. AWR  
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