The Fair Labor Standards Act (“FLSA”) establishes a framework by which employers can take the benefit of a tip credit and pay tipped employees—those who customarily and regularly receive more than $30 per month in tips—a reduced hourly rate of pay. Employers who elect to use the tip credit must ensure that an employee’s tips combined with the employer’s pay equal at least the minimum hourly wage.
The benefit of the tip credit for employers is not unbounded, as tipped employees can only spend a portion of their time performing certain tasks while receiving this reduced rate of pay. Under the FLSA, 29 U.S.C. § 203(m), it is a violation to have a tipped employee spend in excess of twenty percent (20%) of their time performing non-tipped duties such as maintenance and preparatory work.
It is also a violation of the FLSA to have tipped employees receiving a reduced rate of pay perform tasks that are completely unrelated to their occupation. In this scenario, the tipped employee is essentially engaging in a “dual job;” performing non-tipped work while being paid a reduced rate intended for a tipped position.
Trief & Olk has extensive FLSA experience, having litigated against the world’s largest full-service restaurant company, Darden Restaurants, Inc. Part of the claims in that case centered on the practice of using tipped employees such as servers and bartenders to perform extensive side work in excess of twenty percent (20%) of their time, and further, having those tipped positions perform work completely unrelated to producing tips.