A fair day’s pay for a fair day’s work is the mantra of working class America. However, what happens when you don’t receive fair pay? Luckily, federal law provides very strong protections that safeguard the right of the working class to be paid a fair wage.

Waitstaff, chauffeurs and other tipped employees are often the most taken advantage of in terms of pay; however, understanding the basics can ensure your right to earn wages. Keep reading if you are working in the restaurant industry or working in another occupation in which you receive tips or gratuities as part of your pay.

Am I being paid less than the minimum hourly wage?

Most tipped employees receive an hourly wage of less than $7.25 from their employer. Many tipped employees understand that this is the industry norm; however, the legal effect of being paid less than $7.25 per hour gives you heightened protections under the federal wage law known as the Fair Labor Standards Act.

If your employer violates the tip laws, either accidentally or intentionally, then they owe you wages for every hour that you worked during the past two years at the full minimum wage of $7.25 per hour. You are probably thinking: That could be a lot of money, but how do I know if my employer has violated the tip laws? I am going to explain some of the most common violations that I encounter when representing tipped employees.

Do I have to pay for work-related items and incidents?

Many waitstaff, chauffeurs and other tipped employees are required by their employer to pay for various items such as uniforms, cash register shortages, incorrectly ordered food, walk-outs, glass breakage fees, and other incidentals. However, your employer is probably violating the law if they make any deductions from your wages or tips other than deductions for taxes. For instance, if your employer requires you to pay for broken glasses (glass breakage fee), returned food items, uniforms, etc., then the employer is violating the federal wage laws and may owe you the full minimum wage. This is probably true even if your employer had you sign an agreement that they can deduct for your uniform or other items.

Do I have to pay credit card fees to process my tips?

The short answer is yes: You do have to pay for the credit card processing fees to process your tips. However, there is a big often-violated exception. Your employer may only deduct the actual cost to process a credit card tip, but nothing more. To illustrate, I recently obtained a sizable settlement for a group of servers working at a restaurant that was deducting a 5% credit card processing fee for tips; however, as it turns out, the restaurant’s credit card processing fee was only 3%. This extra deduction resulted in a large settlement to my clients.

The important thing to keep in mind here is that employers cannot get greedy and charge you more than the credit card processing fee, nor may they charge you an accounting fee or any other fee for your credit card tips.

My employer requires me to share my tips and contribute to a tip pool. Are tip pools legal?

An employer can require employees to share their tips; however, not all tip pools are legal. In this context, there are heaps of legal issues that an employee should look out for. First, an employee cannot be forced to share tips or contribute to a tip pool where the owners, chef, dishwasher or managers are sharing in the tip pool. So, if you are required to share your tips with the chef, dishwasher or a manager, then this is an illegal tip pool; your employer is violating the federal wage laws.

Another issue that often arises is that employees aren’t sure who’s sharing in the tip-out of a tip pool. I recently obtained a settlement from a restaurant where the servers discovered that the employer was skimming the tip pool by talking to the hosts and bartenders, wherein they were tipped off (excuse the pun) that the tip-out was too low, meaning that some of the tipped pool was going elsewhere. As it turns out, in that particular case, the owners and managers were skimming funds from the tip pool for themselves. The practice of owners or managers skimming money from tip pool or failing to redistribute the entire amount of the tip pool is illegal.

I worked a special event and my employer did not share the service charge from the event. Can my employer keep the service charge?

There is often a lot of confusion among employers and employees alike regarding the payment of service charges versus tips. And yes, there is a difference between a service charge and a tip. A “service charge” is something that is mandatory and not subject to negotiation. The principal example of a service charge is a required charge of 20% for tables of six or more people. On the other hand, a “tip” is something that is completely at the discretion of the customer; the obvious example being cash left on the table or money voluntarily added to the bill by the customer.

The difference between a tip and a service charge is important because a tip belongs to the employee, whereas a service charge legally belongs to the employer/restaurant. In other words, if you work a banquet, and the customer is paying your employer a mandatory, fixed-amount service charge as part of the cost of the banquet, this gratuity does not have to be redistributed to you or any other employee. However, if you are not earning “tips” during the time that you worked the banquet, then your employer cannot use the tip credit, and must be pay you at least the full minimum wage for the hours you’ve worked. This remains true even if your employer elects to distribute the service charge to you; you must still be paid the full minimum wage before accounting for any service charges paid.

Know Your Wage Rights

In sum, servers are often the most taken-advantage-of group in terms of wages. However, the good news is that there are strict laws protecting servers. If you are receiving tips as part of your pay, and you have questions about your employer’s policies, you should reach out to an attorney to discuss. I find that restaurants are some of the most common violators of the wage laws. You can also take a look at my blog, where you may find the answers to your questions.

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This article is not legal advice. The information contained in this article is informational and you should not rely on it instead of legal advice specific to your situation. Drew N. Herrmann is licensed to practice law in Texas. The law in your state may be different to what is discussed in this article. Furthermore, the law in your state may change the analyses or outcomes described in this article.

The information on this website does not create an attorney-client relationship. Any information submitted through the website does not create an attorney-client relationship with Herrmann Law, PLLC. Furthermore, Herrmann Law, PLLC does not guarantee the accuracy of any article published on this website.