There are many ways that service industry employees are cheated of wages. Some service industry employers (such as caterers, restaurants, banquet facilities, airlines) charge customers a mandatory service charge, gratuity, or tip, but do not distribute the service charge to the service employees that earned it. Some positions are commonly tipped, where the charge is not mandatory for the customer, but the employer still takes a portion of the charge. (Commonly tipped employees include waiters and waitresses, hosts/hostesses bartenders, bellhops, skycaps and redcaps, hairdressers and barbers, nail salon workers, exotic dancers, and various others). The practical effect is that the employer or supervisors keeps part or even all of the gratuity that the customer intended for the employee. For example, some restaurants and hotels include a mandatory 15% or 20% service charge or gratuity for food service, but distribute only part (or none) of the gratuity to the food servers. Recent court decisions have held that failure to turn over the entire amount of the tip or service charge to non-supervisory workers invalidates the employer’s claim for a “tip credit” against the current minimum wage. Thus many workers who receive only the federal minimum wage of $2.13 per hour (with the remainder of their wages in tips) are due an additional $5.12 per hour worked. Thus, an employee working 40 hours per week would be entitled to $204.80 in back wages for each week plus an equal amount in “liquidated damages.” A full time employee could be due more than $21,299 per year of employment, if the employer diverted some or all of the tips or service charge to supervisory personnel. This amount is due in addition to the amount of tips wrongfully taken. Tip pooling among non-supervisory employees is permissible, but if a supervisor or owner takes a cut of the tip pool, the employee must be paid at least the current state or federal minimum wage per hour ($7.25), by the employer. Another way that workers are cheated is if the tip credit is taken even though workers spend more than 20 percent of their time engaged in non-tipped activities. The Department of Labor’s (DOL) interpretation of FLSA’s dual jobs regulation, that employees who spend “substantial time,” defined as more than 20 percent, performing related but non-tipped duties should be paid at the full minimum wage for that time without the tip credit, has been upheld by the Courts.
If you work in this industry and would like to speak with us about whether you were paid all wages you were owed, please send us the following information: