Too Much Side-Work? A Win for Servers.

In a ruling that could have sweeping consequences for waiters and waitresses working the restaurant industry, a federal appeals court ruled in favor of waiters and waitresses, holding that a restaurant cannot pay the subminimum wage for certain non-tipped work. In a  significant win for servers, a Court held that employers cannot pay the subminimum hourly rate to servers who perform excessive side-work. This decision will likely have a ripple effect across the country that influences a large number of the way restaurants pay waiters and waitresses in the service industry.

(See our other post on how much side-work is too much for a more thorough discussion on the issues of side-work.)

How the Decision Arose

The case was initiated against several restaurants including P.F. Chang’s China Bistro and J. Alexander’s. One of the workers claims that he spent more than 20% of his time working at J. Alexander’s performing tasks that did not produce tips including cutting fruit and stocking ice. While the restaurant paid the worker the subminimum server wage, the worker argued that J. Alexander’s should have to pay the full minimum wage when performing excessive side-work or when performing non-tip producing activities.

At the heart of the Court’s ruling, was the Department of Labor’s regulation that limited the amount of time an employee could spend performing side-work while still only being paid the subminimum server wage.  The DOL’s rule (commonly known as the 80/20 rule) prohibits restaurant employers from using the subminimum wage if workers spend more than 20 percent of their time on side-work commonly known as the 80/20 rule. The Court upheld the DOL’s 80/20 rule, which means that restaurants cannot pay waiters and waitresses the subminimum hourly rate if the waiters and waitresses are spending more than 20% of their day performing side-work.

The Court also held that restaurants are required to pay bartenders and waiters the full minimum wage when they engage in tasks that are not tip-producing like cleaning toilets or other tasks that are not related to waiting or serving tables. Regardless of whether a server spends more or less than 20% of their time on non-tip producing activities, restaurants are required to pay the full minimum wage to servers when they perform no-tipped producing tasks,

Any different result would have resulted in the ill-effect of allowing restaurants to employ servers to perform non-tipped jobs (such as janitorial jobs) that generally demand an hourly rate that is far in excess of the subminimum rate.

The Rationale Behind the Decision

The Ninth Circuit in this case noted that tips were not designed to function as merely a gift to servers but were instead a cost-saving benefit for employers. As a result, the court argued that granting broader use of the tip credit would permit employers to underpay workers and delay hiring staff who do not receive tips. In making its decision, the Ninth Circuit upheld a regulation by the United States Department of Labor as well as guidelines from the agency that argued for limited use of the tip credit. The Ninth Circuit’s decision also had the added function of reviving lawsuits that had been initiated against restaurant chains by 14 bartenders and servers.

The Impact of the Decision

The Appellate Court’s decision is expected to have a broad impact. There is a case currently pending in Texas regarding the wages servers must be paid when performing side-work and non-tip producing work. The case is Restaurant Law Center v. U.S. Dept. of Labor, No. 18-cv-567 (W.D. Tex. July 6, 2018).

Speak with an Experienced Wage and Hour Attorney

If you are a worker who believes that you were not adequately compensated by your employer, required to participate in an illegal tip pool, or not receiving all of your tips or gratuities you should contact an experienced wage and hour attorney. Get in touch with Herrmann Law today to schedule a consultation 817-479-9229 or contact us online.