Food Servers

A majority owner of two Iowa restaurants has paid $833,992 in back wages to 64 employees to resolve federal wage violations, including falsifying payroll and time records and failing to pay required minimum wages and overtime. Investigators determined that Gloria Ochoa, majority owner of Rojas LLC and Ocha Inc., which do business as El Rodeo Mexican Restaurants, violated the Fair Labor Standards Act (FLSA). Ochoa has also paid a civil money penalty for violating child labor regulations.

 

Investigators determined that Ochoa violated minimum wage requirements when she required servers to cash their paychecks and return the amounts of the checks, in cash, to the employer. Ochoa also required servers to surrender $20 from their daily tips to the employer. Additionally, the restaurants kept no time records reflecting when employees worked, instead paying workers for 80 hours biweekly regardless of their actual hours. This practice resulted in overtime violations when employees worked beyond 40 hours in a workweek, yet received no overtime pay. Employees routinely worked 55 hours per week. Investigators also determined that Ochoa employed a minor employee outside of the work hours allowed by the FLSA’s child labor requirements.

 

Employees depend on receiving all the wages they have rightfully earned. The resolution of this case demonstrates investigators’ commitment to those workers and to leveling the playing field for employers who play by the rules.

 

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Ask anyone who has worked in the service industry and they’ll tell you how hard it can be.  According to the National Restaurant Association, the restaurant industry employs approximately 14.7 million people in the United States.  Many of those employees work at shockingly low hourly rates and depend on tips to survive.  Those employees could be in for added struggle if the current administration succeeds in implementing the proposed Department of Labor regulations.

Currently, the maximum tip credit an employer can claim under the Fair Labor Standards Act (FLSA) is $5.12 per hour.  In other words, because the federal minimum wage is just $7.25 per hour, a tipped employee could be paid as little as $2.13 per hour.  The idea behind the “tip-credit” rule is that the employee is able to make up the difference between the lowered hourly rate and the federal minimum wage rate by receiving tips from customers.  This rule has resulted in a significant amount of litigation because when all is said and done, the employee doesn’t always make enough in tips to bring their hourly rate above $7.25 per hour for all hours worked.  In some cases, the employee may be spending significant time during their shift performing non-tip generating activities like cleaning or rolling silverware, which prevents them from earning tips.  In any case, the bread and butter of a tipped employee’s earnings are their tips.

Given outside factors, such as the rising cost of living or increasing state minimum wage rates, many employers have scrapped the tip credit altogether.  Instead, they pay the employee at the regular minimum wage rate.  Generally, tips received can’t be shared with other employees that are not regularly tipped employees.  However, the FLSA does not address the tip sharing rules for employees that are not subject to a tip credit.  This has led many employers to argue that tips should be used for “topping up” the pay of their untipped “back of the house” workers, such as dishwashers.

The Obama administration prohibited the practice of sharing tips with employees that do not regularly receive tips.  However, under the Trump administration, the Labor Department has proposed rescinding that rule, which would allow restaurants to share wait staff’s tips with back-of-the-house workers.  The administration has argued that it will equalize pay between front of the house and back of the house workers.  However, there remains a concern that the tips are withheld by the employer, not paid to the dishwashers.

If the rule passes, it could result in massive changes to the service industry.  Tips serve not only to compensate the server, but also to motivate them to provide the customer with the best possible experience.  Take tips out of the equation or diminish their importance, and the server that greets you with a smile and kindly laughs at your not-so-funny jokes, might not feel so inclined to do so.

 

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Many restaurant chains employ different levels of “managers” in their restaurants.  Often times, a Regional Manager will oversee several stores in a geographic region.  General Managers or Store Managers will report to the Regional Manager about their specific location.  The next step down on the hierarchy of employees is the Assistant Manager.  Assistant Managers are often the bridge between the General Manager(s) and the staff employees, such as: cooks, wait-staff, hosts, and bartenders.

The Misclassification of Assistant Managers

Too often, Assistant Managers are misclassified by restaurants as exempt from the overtime requirements of the Fair Labor Standards Act (FLSA).  As a result, these assistant managers work long hours, to their employers benefit, for very little pay.  Much of the Assistant Managers time is spent performing the same non-exempt work tasks that the staff employees perform or other non-exempt work. Very little of the Assistant Managers job duties actually include exempt work.

What Does The Fair Labor Standards Act Say?

The Fair Labor Standards Act Requires that all non-exempt employees be paid one and one half times their regular hourly rate for all hours worked in excess of forty in a work week.  Simply compensating an employee on a salary basis and calling them a “manager” does not make them exempt for purposes of the FLSA’s overtime requirements.  Instead, the determination of whether an assistant manager, or any other employee for that matter, is exempt or non-exempt is determined by a detailed analysis of the employee’s duties.  Specifically, the amount of time the employee spends performing exempt work tasks in comparison to the time spent performing non-exempt work tasks.

The determination of whether an Assistant Manager is truly exempt or non-exempt is a question that will be determined on a case by case basis.  If you are an Assistant Manager and believe that you were or are misclassified as exempt from overtime, you should contact and attorney at the Wage Authority Group to review your case.

 

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One of the most common questions the attorneys at the Wage Authority Group receive is why servers, bartenders, and other tipped employees make so little in wages. While federal law mandates a minimum wage of $7.25 per hour, employees who receive tips only have to be paid $2.13 per hour, as long as their tips bring their income for the week above $7.25 per hour. This pay system is generally known as the “tip credit.”

The tip credit makes sense for workers who frequently engage with customers and receive tips. But the savings restaurants get by paying only $2.13 per hour often leads them to apply the “tip credit” for work that is properly compensated under the full minimum wage.

Tipped v. Non-Tipped Employees

Under the Fair Labor Standards Act, employers can only pay the tip credit to employees who are engaged in a traditionally tipped occupation, such as server and bartenders. On the other hand, employees who do not engage with customers, such as cooks, dishwashers, and janitors, do not qualify as tipped employees, and must be paid the full minimum wage.

To avoid paying the full minimum wage to non-tipped employees, restaurants often require their tipped employees to perform work ordinarily assigned to those positions. The Department of Labor has ruled that employers cannot rely on this practice to avoid paying the full minimum-wage for non-tipped work. Workers employed in “dual jobs,” e.g. as a server and a janitor, can only be paid the reduced tip credit wage for the hours worked as a server.

The 20% Rule

Side work is an unfortunate reality of working as a tipped employee. For workers who depend on tips for their livelihood, it can be frustrating to spend your time on work that does not directly lead to tips, such as setting tables, re-stocking supplies, and cleaning the service areas. Recognizing that side work does not directly lead to earning tips, the DOL uses to “20 % rule” to assess when a tipped employees’ side work becomes so excessive that he or she is entitled to the full minimum wage.

Restaurant workers should carefully assess whether their employers are in compliance with the 20% rule. Many large restaurant chains, such as Applebee’s, TGI Friday’s, and Buffalo Wild Wings, have faced class action lawsuits claiming violations of the 20% rule.

Tip-Pooling with Non-Tipped Employees

Another way in which restaurants improperly claim the tip credit is by requiring tipped employees to pool or share their tips with employees who did not engage with customers, such as cooks, dish washers, and expeditors. This also violates the Fair Labor Standards Act, which provides that employees can only be required to share their tips with other employees whose duties regularly involve customer interaction. If you are required to pool or share your tips, you should understand who is receiving them and whether they qualify as a tipped employee under federal law. If not, you and your co-workers may be owed unpaid wages.

 

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The New York State Department of Labor may soon eliminate the “tip credit.” This change would require restaurants and other employers to pay employees the full minimum wage, regardless of how much they make in tips. The full minimum wage will be up to $13.00 per hour in 2018, so this could be a hefty increase in pay for servers, bartenders, and other tipped employees in New York.

The impetus for the change has come from Gov. Andrew Cuomo, who recently issued his fifth proposal for 2018’s State of the State. The proposal calls for public hearings to gather information and views on the effect of eliminating the tip credit.

The tip credit, currently in place in New York and around the United States, allows an employer to pay less than the full minimum wage, with the understanding the employees’ tips will make up the difference. In New York, employers will be able to pay tipped employees as low as $7.50 per hour in 2018. Under federal law, an employer may pay a tipped employee only $2.13 per hour, unless a more protective state law applies.

Tipped employees should follow efforts at the state level to eliminate the tip credit. If Governor Cuomo’s proposal to eliminate the tip credit succeeds, employees in the New York service industry will see a large boost in their hourly rates, as well as numerous other protections offered to New York employees such as “call-in” pay, “spread-of-hours” pay (for workdays over 10 hours), as well as the strict pay statement requirements of the New York Wage Theft Prevention Act. New York is one of the world leaders in the restaurant industry, so other states may follow its lead on this issue.

Currently, employers in all states must adhere to the provisions of the Fair Labor Standards Act regarding tipped employees, which include:

• Employees cannot be required to contribute tips to “the house” or to management.
• Employees cannot be required to pool tips with employees whose job duties do not involve customer interaction.
• Employees cannot be required to spend over 20% of their shifts on duties unrelated to their position as a tipped employee.
• Employers must inform employees of the provisions of the Fair Labor Standards Act governing tipped employees (see if your employer has a wage poster).
• Employers must pay employees at least the “tip credit” minimum wage (currently $2.13 under federal law), as well as additional amounts if the employee does not receive enough tips in the workweek to cover the tip credit.

The attorneys at the Wage Authority Group have represented a variety of tipped workers in New York and other states, including servers, bartenders, car washers, and exotic dancers. Feel free to call in if you’re looking for tips on how to protect your rights as a tipped employee.

 

 

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