c o n s t a n g y c o n s t a n g y b r o o k s & s m i t h, l l p the employers’ law firm,...
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tipping Point:Legal Considerations Regarding Tips
That All Restaurant Employers Should Know
October 5, 2010
Maureen R. KnightConstangy, Brooks & Smith, LLP
Fairfax, Virginia
571-522-6106
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip-Related Laws
Federal Wage Hour Law Fair Labor Standards Act (FLSA)
• Minimum Wage ($7.25)• Overtime (time-and-a-half for hours over 40)
State Wage Hour Laws Minimum Wage and Overtime Tip-specific Laws
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Federal Wage Hour Law
Fair Labor Standards Act
Applies to most companies $500,000 in revenue and Interstate commerce
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
State Wage Hour Laws No federal law preemption
Employers must comply with the more restrictive law
Virginia Mirrors federal wage hour law and exempts
employers covered by federal law
D.C. and Maryland Is more restrictive than federal law regarding
tips
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tip Credit
FLSA and almost every state provides for tip credit
Tip credit – a credit against minimum wage obligations for tips received
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tip CreditAmounts
FEDERAL and VIRGINIA The difference between $7.25 MW and $2.13
(currently $5.12): YOU PAY $2.13
D.C. The difference between $8.25 MW and $2.77
(currently $5.48): YOU PAY $2.77
MARYLAND 50% of the $7.25 MW (currently $3.62): YOU
PAY $3.63
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tip CreditRequirements
Three Requirements Receive more than $30 a month in tips Be informed of tip credit law Retain all tips (except for valid tip pools)
Note: tip credit cannot exceed tips actually received.
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tip CreditNotice Requirement
Employees must be “informed by the employer about the provisions” of the law
Information to be given: Tips will be used to cover some of the MW
obligation. Best practice: Tell them amount of credit.
Inform before credit is taken
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Notice Requirement How to provide notice:
Best practice: Something in writing During interview At orientation Through poster Line-item on paycheck
Note: It is employer’s burden to prove entitlement to tip credit.
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
The Tip CreditRetention Requirement
Cannot use tips to cover shortages Cannot use tips to cover walk-outs Cannot use tips to cover breakages Can reduce tips paid on credit card by
amount paid to credit card company Can implement valid tip pool
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip Pools
Can the employer mandate a tip pool?
Contribution amount?
Who can participate?
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsCan Be Mandatory
If otherwise permissible, yes, can mandate
Some states require tip pools be voluntary, but not Virginia
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsContribution Amount
DOL says that the percentage contribution can’t be more than is “customary and reasonable.”
DOL will not question contribution level that is 15% of tips received (translates roughly to 2% of sales).
At least two courts have rejected this restriction.
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsContribution Amount
Amounts held not invalid: 3% of total gross sales, which at times was
37.5% of tips [federal appellate court covering KY, MI, OH, and TN]
5% to 7% of total gross sales, or 40% of tips [Arkansas federal court]
10% of tips [Indiana federal court]
Amounts held invalid: 4% of sales [Arkansas federal court]
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsParticipants
Who can receive tip pool funds: “Employees who customarily and regularly receive tips” Note: they need not receive the tips directly from
customers
The DOL has said that includes: servers bellhops counter personnel who serve customers busboys/girls service bartenders
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsParticipants
The courts have also allowed: hostesses maitre d’s senior servers
Key criteria: directly involved in table-side service
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsParticipants
Employees who cannot participate:
Back-of-the-house employees (cooks, chefs, dishwashers, expediters who do not run food, etc.)
Managers• Even if they are involved in table-side service
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsParticipants
Who is a manager? Mere supervisory responsibilities usually not
enough Someone with authority to hire and fire, set
hourly wages, control payroll, control operations, etc.
But don’t chance it! Starbucks litigation
$105.8 million judgment regarding shift supervisors (though ultimately overturned)
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Tip PoolsMiscellaneous
No tip credit = no problem (maybe) February 2010: federal appellate court held if
employer is not taking a tip credit (i.e., paying servers full minimum wage), it can require servers to tip-out to whomever it chooses.
Problems DOL does not agree Many state laws will conflict
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Dual Jobs
Tip credit applies only when employee is engaged in tipped occupation
Dual-job employees Tip credit only for hours spent in tipped
occupation
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Related Duties
Tip credit is permissible for time spent on duties related to tipped occupation even if duties not directed toward producing
tips
General types of “related duties” maintenance and preparatory or closing
activities
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Related Duties
Examples of “related duties” (as per DOL) Cleaning and setting tables Toasting bread Making coffee Occasionally washing dishes or glasses
Requirements for “related duties” incidental to the regular duties of the server generally assigned to servers
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Related Duties Example of duties not generally assigned
Servers had to arrive two hours before restaurant opened to prepare vegetables for salad bar and kitchen dishes: held, those are duties of chef
Server assigned to prepare salad for entire shift was engaged in separate job, even though servers prepared those salads when no preparer was on duty
But, server who had to answer phones and work cash register held to be engaged in related duties, even though restaurant had full-time cashier and receptionists.
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Related Duties
Excessive time DOL guidance: related duties cannot exceed
20% of server’s shift Some courts have rejected this limitation;
some have accepted it
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Uniforms Defined What is a uniform?
Something with a logo Specific type and style of clothing; examples:
tuxedo shirt or specific brand of blouse
What is NOT a uniform? Ordinary street clothes (with variations in
dress permitted); examples: khaki pants, white shift, black shoes
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Providing Uniforms Cost of providing uniform cannot bring
wages below minimum Must provide uniform OR Reimburse employees for cost of uniform
If dress is not uniform, no need for reimbursement or providing set
When no laundering reimbursement is required:
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Laundering Uniforms
Cost of laundering “uniforms” cannot bring wages below minimum When laundering required? If uniform requires
ironing, dry cleaning, daily washing, commercial laundering, or other special treatment
How much reimbursement is required? $5.15 per week or actual costs
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Uniforms: Laundering Not Required
Laundering/maintenance reimbursement NOT required if the uniforms Are made of “wash and wear” material; May be routinely washed and dried with other
personal garments; AND Do not require ironing or other special
treatment.
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Overtime for Tipped Employees
Overtime for tipped employees Overtime rate is NOT 1.5 times the cash
minimum wage rate (i.e., not 1.5 times $2.13 in VA)
Overtime rate is 1.5 times the minimum wage, minus the tip credit (i.e., ($7.25 *1.5) - $5.12 = $5.76 in VA)
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C O N S T A N G YC O N S T A N G Y
B R O O K S B R O O K S && S M I T H, L L P S M I T H, L L P The Employers’ Law Firm, Since 1946The Employers’ Law Firm, Since 1946
Questions
Maureen R. KnightPartner
Constangy, Brooks & Smith, LLPFairfax, Virginia
571-522-6106