Archive for the ‘Tip Pooling’ Category

So another restaurant chain is found to be in violation of the Fair Labor Standards Act.

Dallas-based restaurant chain Texas De Brazil Corp. has agreed to pay $177,502 in overtime and back wages to 715 former and current wait staff, including $14,574 to 42 employees at its location in Downtown Memphis. In addition to Memphis, Texas De Brazil has agreed to pay these back wages to current and former wait staff at properties in the Dallas-Forth Worth area; Miami and Orlando, Fla.; Richmond-Fairfax, Va.; Denver; and Schaumburg, Ill.

The agreement follows an investigation by the U.S. Department of Labor’s Wage and Hour Division which found that workers were not properly paid overtime as required by federal law. Under the Fair Labor Standards Act, restaurants must pay wait staff at least $2.13 per hour, but if that pay and combined tips fall below the federal minimum wage of $7.25 an hour, the employer must make up the difference and bring an employee’s pay up to the minimum wage. FLSA also requires that employers pay workers time and a half their regular rate of pay for any hours worked beyond 40 hours per week.

So as you know this has been a previous blog topic of mine, Hard Rock Cafe and many other restaurant chains have been failing to comply with Federal laws in paying their servers. Make sure you are not one of them. If you are a restaurant server and feel that you are getting underpaid or that you are wrongfully being asked to give your tips to other employees, speak with an employment lawyer who handles FLSA cases.


You may recall I recently posted on my blog about the requirements under the FLSA for tipped employees.

Well the national chain of Hard Rock Cafe restaurants have recently been hit with a lawsuit under the FLSA complaining about its tip handling procedures.

The allegations of the Complaint allege that Hard Rock broke the law by paying waitstaff an hourly rate less than the federal minimum wage and forcing them to turn over a portion of their tips to nonwaitstaff employees, according to an amended complaint filed Wednesday in the U.S. District Court for the Middle District of Florida.

Waitstaff have not been allowed to take a tip credit against the minimum wage as they are entitled to under the law, according to the complaint.

While the gratuity/service charge for private dining events held at Hard Rock restaurants typically ranges between 18 and 20 percent, that money is allegedly retained by the company.

The Complaint further alleges that the restaurant chain is unjustly enriched through the misrepresentation of this charge as a gratuity and tortiously interferes with the employees’ relationship with customers, who reasonably believe the service charge goes to the waitstaff, according to the complaint.

The FLSA exempts waitstaff employees from the minimum wage provided they receive tips for their services, and these tips can be shared with bussers and bartenders who also participate directly with the serving of the food, according to Schwab.

However, people who are not directly involved in the serving of food, such as managers or kitchen workers, are not entitled to a share of tips for the waitstaff.

The bottom line is if you are a tipped employee and not getting all of your tips, you should speak with an experienced employment or FLSA (Fair Labor Standards Act) attorney to discuss whether you have a legal cause of action.


In many instances these days, employees are coming to my office with questions about tips, what hourly rate an employee who gets tips must be paid and whether an employer may retain all or any portion of its employee’s tips.  This posting is intended to address some of these issues.  Much of this information is taken from the U.S. Department of Labor’s fact sheet on this issue.

Tipped employees are those who customarily and regularly receive more than $30 a month in tips. Tips actually received by tipped employees may be counted as wages for purposes of the FLSA, but the employer must pay not less than $2.13 an hour in direct wages.

If an employer elects to use the tip credit provision the employer must:

1) Inform each tipped employee about the tip credit allowance (including amount to be credited) before the credit is utilized.

2) Be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined.

3) Allow the tipped employee to retain all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent the employee participates in a valid tip pooling arrangement.

If an employee’s tips combined with the employer’s direct wages of at least $2.13 an hour do not equal the minimum hourly wage — $7.25 an hour effective July 2009– the employer must make up the difference.

The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee. Where an employer does not strictly observe the tip credit provisions of the Act, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage, in addition to retaining tips they may\should have received.

A compulsory charge for service,  (service charge) for example, 15 percent of the bill, is not a tip. Such charges are part of the employer’s gross receipts. Where service charges are imposed and the employee receives no tips, the employer must pay the entire minimum wage and overtime required by the Act.

Tip Pooling: The requirement that an employee must retain all tips does not preclude tip splitting or pooling arrangements among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.

Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee’s wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.

If your employer is retaining your tips, you may want to consult with an employment lawyer.  In addition, if your tips plus hourly wage are not exceeding the minimum wage or you do not believe you are getting paid for overtime, than you should consult with an employment lawyer.  If you have problems with any of these issues you can also contact the U.S. Department of Labor.