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Restaurants: Do your employees know that you take the tip credit?

By Bill Pokorny on May 15, 2017
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Tip-Hand11366723.jpgIf not, you might have a problem.

In 2011, the U.S. DOL published a regulation mandating that restaurants who count tips toward the minimum wage as permitted under the Fair Labor Standards Act have to notify employees that they are taking the credit. (See U.S. DOL Fact Sheet #15 for more information on the current requirement.) Last week, a federal district court in Pennsylvania ruled that a former bartender at Cadillac Ranch All American Bar & Grill could move forward with a hybrid state law / FLSA class/collective action, alleging that the restaurant chain violated the DOL’s notice regulation by failing to tell tipped workers that their wages would be calculated using the tip credit. According to the court’s opinion, the class includes approximately 220 current and former tipped employees. Koenig v. Granite City Food & Brewery, Ltd.

In and of itself, this decision is not particularly surprising or ground-breaking, but that is exactly why it should worry restaurants and other employers of tipped employees. There are certainly areas of business where an informal, “good enough” approach is in fact good enough. Wage and hour law is not one of those areas. The FLSA and state wage and hour law are all about technicalities, which is why they are perfect traps for unwary employers and great sources of business for lawyers.

So, restaurant owners and operators, take heed: If you are not presently notifying all of your employees that you will be taking a tip credit to comply with minimum wage requirements under the FLSA, you may owe all of your tipped employees the difference between the “tipped” minimum wage ($2.13 per hour) and the minimum wage for non-tipped employees ($7.25 per hour), or a total of $5.12 for every hour worked. Over a period of two to three years. Plus liquidated damages (doubling the amount owed) and attorneys’ fees. State law may further increase the liability. If this situation sounds familiar, reach out to your employment counsel today to find out how to protect your business.

 

Photo of Bill Pokorny Bill Pokorny

Bill is a partner at Franczek P.C. As co-chair of the firm’s Labor and Employment Practice Group, Bill is particularly versed in all aspects of state and federal law relating to minimum wages, overtime, exemptions, and wage payment issues. Bill also regularly counsels…

Bill is a partner at Franczek P.C. As co-chair of the firm’s Labor and Employment Practice Group, Bill is particularly versed in all aspects of state and federal law relating to minimum wages, overtime, exemptions, and wage payment issues. Bill also regularly counsels employers on issues relating to the Family and Medical Leave Act (FMLA), disability and accommodations. Bill provides management and employee training on workplace legal issues, and also conducts workplace investigations and legal audits. Bill also has extensive litigation experience, representing employers in federal and state courts and administrative agencies such as the U.S. and Illinois Departments of Labor and the Equal Employment Opportunity Commission. In 2014, Bill was named to the annual “40 Under 40” published by Law Bulletin Publishing which recognizes 40 attorneys under the age of 40 based on nominations by their clients, peers and the legal community.

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  • Posted in:
    Employment & Labor
  • Blog:
    Wage & Hour Insights
  • Organization:
    Franczek P.C.
  • Article: View Original Source

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