Service professionals at restaurants and bars don’t usually have the same minimum wage rights as other workers. They are subject to lower hourly minimum wage rules because there is an expectation that the customers they serve should provide them with gratuities or tips.
The tips provided to professionals at a restaurant can help them earn a competitive wage. Businesses offering drinks and food to the public can keep their staffing costs minimal while keeping their workers motivated by operating on a tipped basis. However, restaurants and similar businesses need to ensure that they don’t violate wage laws for tipped employees. Otherwise, their employees might file wage and hour lawsuits against the business.
What common mistakes lead to tipped employees initiating wage claims?
Charging a fee
There was a time not long ago when most patrons paid their tabs with cash. Very few people carry cash on them anymore. Most people pay with their credit cards, debit cards or smart devices. The restaurant or bar has a processing fee assessed on every transaction. It might seem cost-effective to pass that expense on to employees receiving gratuities. However, federal wage laws prohibit employers from charging workers for receiving tips.
Inappropriate tip pooling
Another common practice at businesses where workers earn gratuities is to pool the tips so that everyone shares. Management might also require that certain workers share a portion of their tips with support staff workers. Requiring that workers tip out managers or owners paid on a salary basis is a violation of fair wage rules that could result in worker litigation.
Refusing to pay overtime
While different hourly wage standards apply, tipped employees are generally hourly workers. They are not exempt from overtime rules. Employers may need to invest some effort into calculating their average hourly wage and determining an appropriate hourly rate for any overtime required of tipped workers. The failure to properly compensate employees who put in more than 40 hours per week could result in litigation.
Employers who understand the wage violations that may lead to litigation can use that information to maintain healthier working relationships with workers who receive gratuities. Compliance with the law and appropriate responses to worker complaints can help employers avoid litigation that can damage their reputations and cost them tens of thousands of dollars.