Tips for Employers Servers

There is a common misconception among servers in the restaurant industry that if a server’s hourly wage plus tips exceeds the minimum wage then your employer can do whatever it wants with your tips. However, this is not the law: even if your wages and tips exceed the minimum wage, federal law prohibits your employer from taking any of your tips.  Additionally, your employer cannot require you to share your tips in an illegal tip pool, nor can your employer make deductions from your tips.

Tips – What do I get to keep?

You work hard to earn your tips – they are your reward for your hard work and a significant part of your overall income. If you work in the service industry, it is important to know about the legal protections that are in place to ensure that you are properly compensated for your work.

Your tips are your own, your employer does not have the right to ask you for any portion of your tips, unless one of the following exceptions apply:

• Your company has a valid tip pooling arrangement – which means that tips can be combined and then disbursed among only the employees who have helped service customers.
• Your company can deduct a credit card processing fee from your earned tips – but they can only charge you the exact amount that they are charged for credit card processing and absolutely no more than that.

The current federal minimum wage is $7.25/hour.  A tip credit, which is guided by federal law, means that your employer doesn’t have to pay you minimum wage, provided that you earn enough in tips to bring your hourly wage up to at least $7.25.  The maximum tip credit an employer is allowed is $5.12/hour. However, there is a common misconception in the industry that if a server’s hourly wage plus tips exceeds minimum wage then your employer can take your tips as long as you earn the minimum wage. Regardless of how much you earn in tips above the minimum wage, federal law tightly regulates where your tips go – your employer cannot take any of your tips.  Your employer cannot require you to share your tips in an illegal tip pool, nor can your employer make deductions from your pay.

In addition to the above, of course, your employer is also required to deduct money for taxes.  Otherwise, by law, all tips you earn are yours to keep.

If my restaurant pools tips, do I have to share my tips with everyone on staff?

Tip pooling is a fairly common practice in the service industry. Employees combine a certain percentage of their tips with that of their coworkers, and all the tips that are “pooled” are then distributed among employees who interact with customers.  While not all of the participants in the tip pool need to earn tips directly from customers, all of the participants must be in some way involved in serving customers. The restaurant owner, managers, supervisors, cooks, dishwashers and other kitchen staff cannot be included in a tip pool.  If your company distributes pooled tips to back-of-the-house, kitchen staff, managers, or others who do not directly interface with customers, this is considered to be an illegal tip pool and you may be entitled to the full minimum wage for all of the hours that you worked, all of the tips that you contributed to the pool, and possibly even more money. We can help you figure out if ineligible employees are a part of your company’s tip pool, or if the restaurant owners and managers are failing to properly distribute all pooled tip money, and if you may be entitled to damages.

What is tip theft?

If a customer doesn’t pay what they owe, or leaves without paying the bill, you are not responsible for the charges. Your employer cannot take this money out of your wages or tips.  If there is a cash shortage at the end of the workday, your boss cannot ask you to make up the difference through your wages or tips. These are two common practices that can be categorized as tip theft.  A few other examples (but certainly not an exhaustive list) of illegal tip theft include:

• Employers charging employees for broken dishes.
• Employers requiring staff to purchase their own uniforms.
• Restaurants charging servers a “house fee.”
• Restaurants requiring employees to eat meals at their restaurants and charging them for their meals.

Generally, an employer cannot charge you for anything that should be considered a day-to-day cost of running their business.

Can I be paid server wages to do side-work?

“Side work” – or work you do to help the restaurant when the restaurant is slow, such as filling salt and pepper shakers and rolling silverware, obviously does not allow you to earn tips.  Thus, you are performing such tasks at less than minimum wage. If the amount of side work you are asked to do is fairly minimal, your employer can use a tip credit to make up the difference between your hourly rate and minimum wage.  However, this is only applicable if side work is related to your job makes up less than 20 percent of your work. If more than 20 percent of the hours you spend are on side work, your employer is required to pay you minimum wage, and not your hourly rate, for any time you are spending doing work that doesn’t garner tips for you.

Are gratuities and service charges treated the same way as tips?

Gratuities are different than tips in that service charges or gratuities are mandatory and added to the actual bill total, and a tip is additional compensation that is voluntarily given by the customer and added to the bill. Often restaurants add an automatic gratuity charge of 15-20% for large parties, but gratuities are not tips. Employers are allowed to keep a portion of a gratuity charge, and do not have to give any portion to the servers. Whatever they do decide to give to the employee is considered to be a non-tip wage. Therefore, any additional compensation you receive through a mandatory gratuity cannot be added to the tip credit calculation, and may have an effect on the rate that you are paid for overtime. Legally, wait staff is entitled to overtime pay for any time worked above 40 hours a week, and overtime pay is time and a half (in other words, one and half times your hourly wage).  If you received any mandatory gratuity as a part of your earnings, and worked overtime, you are entitled to a higher rate of compensation.  If you think you may have missed out on some of the pay you are entitled to because of gratuity charges, get in touch with us for a consultation at 817-479-9229 or contact us online and someone from our office will contact you within 24 hours.

If my employer has inappropriately taken some of my tips or charged me for something I shouldn’t be responsible for, will I get repaid?

Yes, you may be able to recover the money that is owed to you.  If you believe that your tips have been misappropriated, you should consult with an attorney who specializes in employment law issues in the service industry to help you recover what should be rightfully yours.  If your employer hasn’t paid you appropriately, you may be entitled to:

• The full minimum wage for every hour you worked in the last 2 or 3 years multiplied by 2. In other words, your employer must retroactively pay you the full minimum wage for the previous 2 or 3 years. If you are paid $2.13 per hour, your employer would have to pay you an additional $5.12 per hour for every hour you worked in the previous 2 or 3 years, which is then multiplied by 2. Basically, you are entitled to recover $10.24 per hour for every hour you worked in the past 2 or 3 years!
• All of the tips that your employer illegally retained from you and any charges you may have incurred that were just part of the company doing business.
• Again, any damages (reparations for lost wages) you recover are then doubled – a “double award” in an amount equal to the amount of the minimum wage differential plus the amount of misappropriated tips.
• The attorneys’ fees and costs you incurred in pursuing your claim against the employer.

If we take your case on a contingency, our fees and costs will come out of your settlement. If we are unsuccessful in recovering wages, you will owe us nothing and we will be paid nothing. We will never ask you for money if we are unsuccessful in recovering money on your behalf.

Can my employer fire me or cut my hours if I file a lawsuit or talk to a lawyer about my claims?

Federal law prohibits your employer from firing you or taking any adverse action against you because you decided to bring a lawsuit against them.  This is called retaliation. The law was designed to encourage people to come forward without fear of any negative repercussions from their employer. The laws can only protect those who come forward to enforce them and collect their back wages. The servers who come forward are not only able to collect their back wages, but by taking a stand, they motivate change so that servers do not continue to be subjected to unfair wage practices.

If you have any questions or if you would like to talk about your specific situation and what tips you are entitled to by law, please contact an employment lawyer at Herrmann Law for a consultation by calling 817-479-9229 or contact us online and someone from our office will contact you within 24 hours.