Understanding Tip Credit Abuse: How Restaurants Exploit Servers with Non-tipped Work

Posted August 17, 2023

Restaurants and Tip Credit Exploitation: A Growing Concern

The hospitality industry is notorious for taking advantage of their staff, and one area where restaurants most often exploit their workers is through misuse of the tip credit (i.e. exploiting workers through the overuse of the subminimum hourly server wage). This article was written as a guide for servers. In this guide, we aim to shed light on the illegal practices restaurants engage in by making servers perform non-tipped work while paying servers the subminimum hourly wage. This article is essential for servers seeking to understand their rights and hold their employers accountable for taking advantage of servers.

Understanding the Tip Credit and Non-Tipped Work

What Is the Tip Credit?

The tip credit allows employers to pay tipped employees like servers and bartenders less than the applicable state or federal minimum wage. But what happens when servers are assigned non-tipped work? Can restaurants continue to pay the subminimum hourly wage? Read on to find out.

Misuse of Tip Credit

Employers cannot take a tip credit for time spent on non-tipped tasks. Here, we’ll delve into the rules governing tip credit, relying on notable court cases and regulations to illustrate how this system can be abused.

The Legal Framework for Non-Tipped Work

The Fair Labor Standards Act (FLSA)

The FLSA, 29 U.S.C. §§ 201, et seq., mandates that tipped employees such as servers spend their time engaged in tip-producing tasks. This ensures that those receiving subminimum wages can earn enough in tips to meet at least the minimum wage.

The Dual Jobs Regulation

Under 29 C.F.R. § 531.56(e), a tipped employee’s engagement in non-tipped duties must be scrutinized. The employer cannot take a tip credit for unrelated tasks–tasks that do not produce tips. In other words, an employer cannot pay a server the subminimum hourly wage if the server is performing non-tip producing duties. In addition, the employer must limit any related non-tipped tasks to less than twenty percent of working hours.

Case Laws and Rulings

Fast v. Applebee’s Int’l, Inc.

This case affirmed that tip credit cannot be used to pay for non-tipped labor unrelated to the primary tip-generating occupation.

Rafferty v Denny’s

The Eleventh Circuit emphasized that servers must spend the majority of their time on tip-producing tasks. Additionally, an employer cannot pay a server at the subminimum hourly rate if the server is required to perform any non-tip producing tasks that are unrelated to serving customers (e.g. taking out the trash, cleaning dishes, mopping the kitchen, etc.).

Driver v. AppleIllinois, LLC

The Seventh Circuit ruled that restaurants cannot use tip credit for non-tipped duties such as dishwashing and cleaning.

Rules Regarding Non-tipped Work

Unrelated Non-tipped Work

Full Minimum Wage Required for Unrelated Work: An employer must pay the full minimum wage for all time spent performing unrelated non-tipped duties. E.g., vacuuming, general cleaning, etc.
Defining Dual Jobs: If servers are performing duties that are customarily handled by non-server staff, they should be paid full minimum wage for that time.

Related Non-tipped Work (80/20 Rule)

Limitation on Related Duties: If related non-tipped work exceeds 20% of a server’s time, full minimum wage applies.
Agency Guidance on the 80/20 Rule: Endorsed by the Eighth, Ninth, and Eleventh Circuits, the 80/20 rule is vital to understand for both servers and employers.

Knowledge is Power: Know Your Rights as a Server

As a server or restaurant worker who earns tips for a living, it’s crucial to understand the complexities surrounding tip credit. Restaurant owners must adhere to the FLSA and the Dual Jobs Regulation, ensuring that tip credit is not exploited. If you find yourself performing non-tipped duties, you may be entitled to the full minimum wage for that time.

If you believe your employer is contravening the laws regarding nontipped duties, it’s time to stand up for your rights. If you believe your rights have been violated, the employee rights attorneys at Herrmann Law are ready to fight for your cause. Feel free to call us at (817) 479-9229 or submit your information to us online for review and someone from our office will contact you within 1 business day.

Stand Up for Your Rights and Do not Become a Victim of Performing Excessive Side Work

Contacting an experienced worker’s rights attorney who has experience representing employees in the service industry is an important first line of defense in protecting your wages. At Herrmann Law, we are committed to supporting and empowering servers.

If you’re a server and are faced with an employer who requires you to perform a seemingly never ending list of nontipped duties and side work, we encourage you to contact us to learn more about your rights by calling 817-479-9229 or submitting your information to us online for review.

We’re more than a law firm – through our tireless advocacy and legal representation for servers and bartenders, we are empowering servers and bartenders across the country. #EmpoweringServers #SideWork #ServersRights #FLSA #FairWages #RestaurantLaws