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Total Articles: 83

Congress and the DOL Wade Into the Tip Pool, Reverse Obama-Era Regulations

Restaurant owners have been anxiously awaiting the Department of Labor’s (DOL) guidance regarding proper participation and operation of tip pools after the passage of the March 23, 2018, Consolidated Appropriations Act, which contained a little notice amendment to the Fair Labor Standards Act (FLSA). Tip pooling regulations have undergone a series of reversals recently as the DOL has worked to find a one-size-fits-all regulation to apply to varying restaurant concepts. In 2010, the Ninth Circuit, in Cumbie v. Woody Woo, Inc., provided a victory for employers that did not take a tip credit by allowing those restaurants to permit tipped and non-tipped employees to share in tips from customers. In response, in 2011, the DOL issued regulations disagreeing with the court’s decision and explicitly prohibiting employers from distributing tips through mandatory tip pools to employees who do not “customarily and regularly receive tips” from guests (effectively excluding traditional back of house employees and, in most cases, hostesses).

The Tip Pool Saga Continues

In the past year, the U.S. Department of Labor (DOL) has made several announcements concerning the evolution of the tip pooling rules. These have focused on employees who had been banned from inclusion in a tip pooling arrangement due to the nature of their work, even if they earned the federal minimum wage and their employer did not claim a tip credit on their wages. (For a full discussion of the prior announcements, please see our December 13, 2017 and September 20, 2017 articles.)

Frustrated, Angry, or Discouraged? Tips for How to Treat Former Employees’ “Vent Letters”

Sometimes departing employees are more comfortable expressing their concerns in writing rather than communicating them verbally. These written messages may take the form of what’s often called a “vent letter,” which could range from an informal email to something that looks more like a formal complaint. Employers and human resources (HR) professionals are tasked with appropriately addressing such communications. Here are some tips and answers to commonly asked questions about vent letters.

DOL Clarifies Tip Pooling Law

As reported last week, on March 23rd, President Trump signed into law a massive spending bill that, among other things, amended the Fair Labor Standards Act (FLSA) to clarify that a manager or supervisor may not keep his employees’ tips. The amendment, however, did not define the term “manager” or “supervisor.” Further, although the March 23rd amendment eliminated a 2011 Department of Labor (DOL) regulation that prohibited an employer from requiring a tip pool with employees other than those who “customarily and regularly receive tips” even if it paid the employee at least the minimum wage, the amendment did not state that the business practice was acceptable.

DOL Clarifies Amendment to the FLSA's Tip Pool Rules

On March 27, 2018, President Donald Trump signed into law Congress’s $1.3 trillion, 2,232-page omnibus budget bill, the Consolidated Appropriations Act, 2018. Notably, on page 2,025, Congress amended the Fair Labor Standards Act by addressing rules affecting tipped employees and tip ownership, and putting to rest a notice of proposed rulemaking on the same subject. The FLSA amendment left open many questions, some of which were answered on April 6, 2018, when the Department of Labor issued Field Assistance Bulletin No. 2018-3.

DOL Tries to Clear Up Confusion About FLSA Tip Credit

After Congress amended the Fair Labor Standards Act (FLSA) last month to prohibit managers and supervisors from keeping employees' tips, many employers were left to wonder: who exactly is a manager or a supervisor?

Here's a Tip: Tread Carefully

As we previously wrote, Congress has now amended Section 3(m) of the federal Fair Labor Standards Act (FLSA) to prohibit an employer from "keep[ing] tips received by its employees for any purpose, including allowing managers or supervisors to keep any portion of employees' tips, regardless of whether or not the employer takes a tip credit." So why did Congress include this amendment within a budget reconciliation bill, with little fanfare and apparently no public debate? With that question in mind, we look back at the series of events that culminated in the recent amendment. We also highlight questions resulting from the amendment that will likely require future agency guidance and/or regulatory action.

Omnibus Budget Bill Amends FLSA Tip Provisions

An amendment to the Fair Labor Standards Act (FLSA) in the Consolidated Appropriations Act of 2018, the omnibus budget bill signed into law by President Trump and effective on March 23, prohibits employers, including managers or supervisors, from keeping any part of tips received by employees for any purpose, regardless of whether the employer takes a tip credit.

Who Won? – The New Tip Pool Law

On March 23rd, President Trump signed into law a massive spending bill. Buried on page 2025 of the spending bill, available here, is the following amendment to Section 203(m) of the Fair Labor Standards Act (FLSA), the federal wage-hour law: “An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.” The new law also states that any employers who violate this rule will be liable to the employees in the amount of the tips that were taken, “an additional equal amount as liquidated damages,” and “a civil penalty not to exceed $1,100 for each such violation,” as the U.S. Department of Labor (DOL) shall determine. The back story to this change in the wage-hour law is important to understanding its impact on wage-hour enforcement going forward.

FLSA Amendment Bars Employers from Retaining Tips But Removes DOL Prohibition on Tip Sharing

An amendment to the Fair Labor Standards Act (FLSA) in the omnibus budget bill, “Consolidated Appropriations Act, 2018,” passed by Congress and signed by President Donald Trump on March 23, 2018, provides that an employer “may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees’ tips, regardless of whether or not the employer takes a tip credit.”

FLSA Amendment Bans Employers From "Keeping" Tips

In the budget reconciliation bill passed early this morning, Congress included a rider amending the federal Fair Labor Standards Act (FLSA) Section 3(m) to state,

Ninth Circuit Creates More Uncertainty in 80/20 Rule for Tipped Workers

Executive Summary: On February 16, 2018, the United States Court of Appeals for the Ninth Circuit granted en banc review of Marsh v. J. Alexander’s LLC, 869 F.3d 1108, creating a new layer of uncertainty for hospitality employers. The previous decision by a three-judge panel on September 6, 2017, had rejected what is commonly called the “80/20 rule,” which states that hospitality employers may not reduce a tip-earning employee’s hourly pay below the minimum wage when that employee spends more than 20 percent of his or her workweek on non-tip-earning tasks. The case will now be reconsidered by a larger panel of the Ninth Circuit, with oral argument scheduled for the week of March 19, 2018. The grant of en banc review suggests an intention to reconsider the panel’s prior holding or analysis.

Eleventh Circuit Allows Employer to Share Employee's Tips as Long as It Pays Employee Minimum Wage

Federal regulations currently treat tips as the employee’s property, regardless of whether the employer pays that employee the minimum wage or whether it uses a tip credit to satisfy the minimum wage requirement. Recently, the federal Department of Labor (DOL) proposed a rule that, if passed this year, would allow employers to require the sharing of tips with employees who do not customarily receive direct tips (such as restaurant cooks, dish washers, and similar workers), so long as the employer pays employees the full federal minimum wage of $7.25 per hour. Employers who use the tip credit option to satisfy the minimum wage obligation would not be allowed to require tip sharing with workers who do not customarily receive tips.

Department of Labor Moves One Step Closer to Allowing Employers More Flexibility in Their Tip Pooling Practices

The U.S. Department of Labor (DOL) published a notice of proposed rulemaking (NPRM) in the December 5, 2017 edition of the Federal Register, with a proposal to rescind its 2011 regulations on tip pooling. The NPRM appears to be, at least in part, a response to efforts by the hospitality industry – particularly the restaurant industry – to press for change to the strict rules on tip sharing.

DOL’s Tip of the Hat to Back-of-the-House Employees: New NPRM to Rescind 2011 Regs

In response to significant pressure from the hospitality industry—specifically, the restaurant industry—as well as increasing litigation and changes to reduce or eliminate the use of tip credits at the state level, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking (NPRM) in the December 5, 2017, edition of the Federal Register, in which it proposes to rescind its 2011 regulations concerning tip pooling.

Explanation of the DOL's Proposed Rules on Tips

There’s been plenty of press this week regarding the U.S. Department of Labor’s proposed rules governing employer treatment of tips. Commentators are debating whether the proposed changes are a sensible return to the four corners of the Fair Labor Standards Act or a cash-grab for the restaurant industry at the expense of workers. We’ll leave the economic and political analysis to others, but we do think that it’s important for employers to understand exactly what the proposal is, and is not.

DOL's Proposed Rule Change to Give Employers Increased Flexibility to Distribute or Retain Tips from Employees Earning the Full Minimum Wage

Executive Summary: On December 5, 2017, the U.S. Department of Labor (DOL) published its Notice of Proposed Rulemaking (NPRM) to reverse the Obama Administration’s tip rule prohibiting the distribution of tips to anyone other than the tipped-employees who earned them (available here). The Obama-era rule has been lauded by employee-advocates as a needed protection from employer abuse, while criticized by employers for stifling their ability to share tips with other non-tipped employees. It has also created legal uncertainty throughout the country, and caused a split among federal courts. Although the DOL’s newly proposed rule will provide increased short-term certainty for employers, legal challenges on this issue are likely to continue.

DOL Issues Proposed Rule to Rescind 2011 Regulations that Impose Tip-Sharing Restrictions on Employers that Pay the Full Federal Minimum Wage to Employees

The U.S. Department of Labor (DOL) has issued a proposed rule to rescind the Department’s position that employers must comply with tip-pooling requirements even when paying the full minimum wage. This proposal, if finalized, would allow employers that pay employees at least the full federal minimum wage to require employees to share tips with employees who are not otherwise customarily tipped, such as cooks, dishwashers, porters and maintenance staff. This rule would not affect employers that apply a tip credit towards employees’ wages.

USDOL Seeks To Narrow Tip-Retention Prohibition

We have previously written about the U.S. Department of Labor's position adopted in 2011 saying that an employer may not retain any of an employee's tips even if management:

USDOL's Proposed Tip-Pooling Modification Sent To OMB

The U.S. Department of Labor has taken the next step toward rescinding the prior administration's 2011 regulatory position that an employer may not retain any of an employee's tips even if management:

DOL Confirms to OMB It Will Reverse Course on Yet Another Controversial Regulation, New Rule Will Reduce Restrictions on Tip Sharing

In recent years, one significant issue that has plagued industries employing tipped employees is whether the employers must ensure that tipped employees retain all of their tips even if the company is not using the employee’s tips to satisfy part of the minimum wage pursuant to the FLSA’s “tip credit” provision, 29 U.S.C. § 203(m). The provisions of Section 203(m) of the FLSA require, among other things, that tipped employees paid a tip credit rate retain all of their tips except for permissible tip pools.

Do Customer Tips Belong the Employee or Employer?

When a customer leaves a tip for a server, who receives the full amount of the tip at the end of the day? According to a 2011 Department of Labor (DOL) regulation, the tip always belongs to the server, even if the employer pays the server minimum wage. However, a recent DOL announcement in late July has put this issue back on the table and may resolve a conflict between courts across the country as to tip practices within the hospitality industry. The 2011 regulation states that tips are the property of the employee regardless of whether the employer pays the employee minimum wage and claims a tip credit. Now, DOL is rescinding this regulation, which will allow employers more flexibility in their tip pooling practices.

Ninth Circuit Rejects DOL's Interpretation of the "Dual Jobs" Regulation for Tipped Employees

On September 6, 2017, the Ninth Circuit Court of Appeals declined to accord deference to the U.S. Department of Labor's (DOL) interpretation of its "dual jobs" regulation. The court reasoned that the interpretation, as articulated in the DOL's Field Operations Handbook (FOH), was inconsistent with the dual jobs regulation and attempted to create a de facto new regulation. The appellate court rejected the FOH's requirement that employers evaluate employee work on a duty-by-duty and minute-by-minute basis to determine whether an employer may take a tip credit for specific time worked. The court favored the DOL's earlier guidance on the regulation, which instructed employers to look for a "clear dividing line" to distinguish between when an employee is engaged in a customarily tipped occupation versus a second and separate non-tipped occupation.

DOL’s “80/20” Tip Credit Rule Entitled to No Deference, Ninth Circuit Holds, Creating Circuit Split

Finding it wholly inconsistent with the statute and the regulation it purports to interpret, the Ninth Circuit has held invalid the United States Department of Labor’s “80/20” tip credit rule, or “20% Rule,” which limits the availability of the tip credit when tipped employees spend more than 20% of their time performing allegedly non-tip generating duties.

The Ninth Circuit Affords No Deference to the DOL's 80/20 Tip-Credit Guidance—Creating a Circuit Split and Potentially Setting Up a Supreme Court Fight

Executive Summary: On September 6, in Marsh v. J. Alexander’s LLC, the Ninth Circuit Court of Appeals refused to give deference to the U.S. Department of Labor’s (“DOL”) tip-credit guidance under the Fair Labor Standards Act (“FLSA”). The guidance—commonly known as the “80/20 rule”—provides that employers may not take a “tip credit” for time spent performing duties “related” to tip-producing activities (e.g., cleaning tables or rolling silverware) if these duties constitute more than 20 percent of the tipped employee’s time in a given week. In holding that the 80/20 rule is inconsistent with the FLSA because it improperly analyzes an employee’s duties rather than the performance of distinct jobs, the Ninth Circuit created a circuit split on this issue, and potentially paved the way for a U.S. Supreme Court decision with national impact.

eLABORate: 9th Circuit Serves Employers with a Win in Row Over Tip-Credit

In a decision rendered on September 6, 2017, the 9th U.S. Circuit Court of Appeals found that the Department of Labor’s (“DOL”) interpretative guidance on an employer’s obligation to pay tipped workers the federal minimum wage for non-tipped work under the Fair Labor Standards Act (“FLSA”) is not entitled to deference.

The Department of Labor Changes Course on Tip-Pooling Restrictions

Quite a bit of effort goes into making an enjoyable restaurant experience, such as good food, prompt service and, of course, cleanliness. Want to reward the dishwashers for providing you with spotless silverware, expediters for bringing out your food while it is still hot or the chef for cooking the perfect meal by leaving a generous tip? Not so fast. Cooks, expediters and other back-of-the house employees historically have not been able to legally share in the tips that are pooled and distributed among the servers, hosts and others in the front of the house.

What To Know About Proposed Changes To Tip-Pooling Rule

The U.S. Department of Labor plans to propose, sometime in August, a full rescission of the controversial tip-pooling restrictions that impact employers who pay tipped employees the full minimum wage directly, according to a regulatory agenda published July 20. This news should come as a welcome relief to employers in the hospitality industry, especially those operating in the Ninth Circuit — which includes the states of California, Nevada, Washington, Arizona, Oregon, Idaho, Montana, Hawaii, and Alaska — where a divisive 2016 appellate court decision has operated the last several years to handcuff a substantial number of businesses.

The Triumphant Return of Tip Pooling: DOL Announces Repeal of 2011 Regs

In a welcome sea change for the hospitality industry, the U.S. Department of Labor (DOL) announced on July 20, 2017 that it would repeal the Obama administration’s 2011 regulations that severely curtailed tip pooling. The DOL further announced that, as it works to finalize the repeal, its investigators are barred from enforcing the Obama-era rule.

DOL Plans to Repeal Tip-Pooling Restrictions

The US Department of Labor (DOL) has announced that it plans to rescind the current Fair Labor Standards Act (FLSA) restrictions on "tip pooling by employers that pay tipped employees the full minimum wage directly."

Tip-Pooling Restrictions Slated To Be Rescinded, Labor Department Announces

The U.S. Department of Labor plans to propose a full rescission of the controversial tip-pooling restrictions impacting employers who pay tipped employees the full minimum wage directly sometime in August, according to a regulatory agenda published this morning.

Reflections Upon USDOL "Tip Retention" Enforcement

We recently wrote about two federal appellate decisions holding that tipped employees for whom no federal Fair Labor Standards Act Section 3(m) "tip credit" has been taken, and to whom all FLSA minimum wages and overtime compensation due have been paid, may not sue under that law to recover tips that their employers allegedly unlawfully retained.

Department Of Labor To Rescind 2011 Tip Pooling Regulation

Today the Trump Administration, through the Office of Management and Budget’s Office of Information and Regulatory Affairs, released the federal government’s semi-annual Unified Agenda of Regulatory and Deregulatory Actions.

Tenth Circuit Rules Employer That Pays More Than Minimum Wage Does Not Have to Share Customers' Tips With Employees

Executive Summary: On June 30, 2017, the U.S. Court of Appeals for the Tenth Circuit ruled in Marlow v. The New Food Guy, Inc. d/b/a Relish Catering (Relish) that neither the Fair Labor Standards Act (FLSA) nor a Department of Labor (DOL) regulation requires an employer to share customers’ tips with employees so long as the employees are paid more than minimum wage.

Valet Driver's FLSA Tip Claim Fails

In a welcome decision for employers, the Eleventh Circuit U.S. Court of Appeals (having jurisdiction over Alabama, Florida, and Georgia) recently ruled that a tipped employee for whom no federal Fair Labor Standards Act "tip credit" had been taken, and to whom all FLSA wages due had been paid, could not sue her employer under that law for allegedly converting some of her tips to the employer's own uses.

Restaurants: Do your employees know that you take the tip credit?

In 2011, the U.S. DOL published a regulation mandating that restaurants who count tips toward the minimum wage as permitted under the Fair Labor Standards Act have to notify employees that they are taking the credit. (See U.S. DOL Fact Sheet #15 for more information on the current requirement.) Last week, a federal district court in Pennsylvania ruled that a former bartender at Cadillac Ranch All American Bar & Grill could move forward with a hybrid state law / FLSA class/collective action, alleging that the restaurant chain violated the DOL’s notice regulation by failing to tell tipped workers that their wages would be calculated using the tip credit.

Scaling The Wall Of Conflicting "Tip Credit" Provisions

We've all struggled with what to do when we're given conflicting orders. Grandma says "have some pudding," and Pink Floyd's Roger Waters responds, "how can you have any pudding if you don't eat your meat?!" Employers are increasingly facing similar (though perhaps less-existential) wage-related conflicts.

Ninth Circuit Stands By Tip-Pooling Restrictions

The U.S. Court of Appeals for the Ninth Circuit has denied petitions for rehearing, as a panel or en banc, its opinion earlier this year holding that the U.S. Department of Labor could extend the Fair Labor Standards Act’s tip-pooling restrictions to instances where the tipped employees received the minimum wage without reliance on the Section 203(m) tip credit. Circuit Judge Diarmuid O’Scannlian’s highly critical dissent, in which he was joined by nine others, could serve as a tempting invitation for the U.S. Supreme Court to accept review of the matter.

Federal Appeals Court Refuses To Reinstate Tip-Pooling Policies

Restaurants and other hospitality businesses in the Western U.S. received bad news late yesterday as a federal appeals court refused to strike down a controversial tip-pooling regulation. The U.S. Department of Labor’s (USDOL’s) rule prohibits businesses from requiring employees to share their tips even if the tipped employees are paid minimum wage, and although a group of hospitality employers hoped that a court would reject the rule as running contrary to well-established law, the 9th Circuit Court of Appeals once again upheld the rule.

eLABORate: Interpretation of FLSA 'Tip Credit' Provision Continues to Unfold

A federal district court in the Southern District of Florida joined a growing number of district courts in holding that the Department of Labor’s interpretation of the “tip credit” provision of the Fair Labor Standards Act, 29 U.S.C. § 203(m), is invalid. See Aguila v. Corporate Caterers II, Inc., No. 1:15-cv-24350-KMM, 2016 WL 4196656, *1 (S.D. Fla. Aug. 9, 2016).

Federal Court In Florida Is Latest To Reject DOL Regulation, Finds FLSA Does Not Require That Employees Receiving Full Minimum Wage Retain All Tips

While Department of Labor regulations interpreting the FLSA remain the primary source of employer guidance regarding the Act’s requirements, they are not necessarily the final word on what federal wage law requires. This is so even where they have been subject to “notice and comment,” triggering a higher level of judicial deference.

Seventh Circuit Issues Employer-Friendly Ruling on FLSA Tip Credit

The Fair Labor Standards Act has long provided that an employer may satisfy its federal minimum wage obligations for a tipped employee by applying the employee’s tips as a credit toward the minimum wage and, in doing so, directly pay such employee less than the general minimum wage. If the employer’s wages plus the employee’s tips do not equal or exceed the minimum wage, the employer must make up the difference. Moreover, in order to take advantage of the tip credit, the employer is required to notify its tipped employees that it is taking the tip credit and to provide certain information pertaining to the credit.

Federal Court In Georgia Rejects DOL Regulation, Rules FLSA Does Not Require That Employees Receiving Full Minimum Wage Retain All Tips

On July 26, 2016, Judge William S. Duffey of the United States District Court for the Northern District of Georgia issued a decision holding that an employer does not have to ensure tipped employees retain all of their tips if the company is not using the employee’s tips to satisfy part of the minimum wage pursuant to the FLSA’s “tip credit” provision, 29 U.S.C. § 203(m). In Malivuk v. AmeriPark, LLC, the plaintiff sued defendant AmeriPark, LLC (a provider of valet parking services) under the FLSA claiming that Ameripark illegally withheld tips paid to her and other valets. Malivuk v. AmeriPark, LLC, 2016 U.S. Dist. LEXIS 97093 (N.D. Ga. July 26, 2016).

Employers Can Claim Tip Credit Even When Employees Perform 'Related Duties,' 7th Circuit Rules

Restaurants and other employers that require wait staff, bartenders and other tipped employees to clean tables, make coffee or perform other similar duties can draw comfort from a new appeals court ruling.

Fifth Circuit Declines to Broaden Permitted Deduction of Credit Card Fees from Tips

The U.S. Court of Appeals for the Fifth Circuit concluded on June 14, 2016 that an employer may not deduct more than the actual credit card fees associated with liquidated credit card tips for employees without compromising the tip credit taken by the employer against the employee’s wages. Steele v. Leasing Enterprises, Ltd., No. 15, 20139 is an important decision for employers with operations in the Fifth Circuit because it endorses for the first time other courts’ conclusions that certain deductions may be made against an employee’s tips by an employer without disturbing the tip credit, but illustrates the danger in overreaching in those deductions.

USDOL's Tipped-Employee "Subminimum Wage" Fiction

A recent U.S. Labor Department blog post re-casts the agency's long-running campaign against an alleged "subminimum wage for tipped workers" under the federal Fair Labor Standards Act. Although this latest pitch introduces a different phrase, USDOL also recycles last year's canard that "[t]he current federal tipped minimum wage . . . still stands at just $2.13 per hour."

Here's a tip: Don't skim from employee tips

Hospitality industry employers take note: If you claim a “tip credit” toward the minimum wage for any of your employees, you need to make sure that all tips are properly distributed to employees. A recent case from the Fifth Circuit Court of Appeals involving a Texas restaurant chain illustrates the hazards of making a mistake with the tip credit rules. Steele v. Leasing Enterprises, Ltd. (.pdf)

Split Ninth Circuit Decision Clarifies the Limitations of Tip Pooling

In a split 2-1 decision, the Ninth Circuit Court of Appeals ruled in Oregon Restaurant and Lodging Association v. Perez (February 2016) that its 2010 decision in Cumbie v. Woody Woo, Inc. did not prevent the U. S. Department of Labor (DOL) from implementing regulations prohibiting all employers—even those that do not take advantage of a “tip credit”—from requiring tipped employees to participate in a tip pool that includes employees who are not “customarily and regularly” tipped.

Ninth Circuit Approves DOL Rule that Restricts Tip Pooling

Section 203(m) of the Fair Labor Standards Act (FLSA) allows employers of tipped employees to take a tip credit against the employer's minimum wage obligation if: (a) notice of the tip credit is provided, and (b) tipped employees are allowed to retain all of their tips, except in the case of tipped employees participating in a valid tip pool that only includes other tipped employees. The DOL's 2011 Regulations provided that employers who do not take a tip credit pursuant to § 3(m) must pay their employees the full cash minimum wage, may not retain employees' tips, and may not require employees to participate in a tip pool that includes non-tipped employees. The 2011 Regulations were a direct response to, and rejection of, the Ninth Circuit Court of Appeals' decision in Cumbie v. Woody Woo, 596 F.3d 577 (9th Cir. 2010), which held that § 3(m) does not preclude employers who do not take a tip credit from maintaining a tip pool that includes non-tipped employees (e.g. cooks, dishwashers and other back-of-the-house employees).

Ninth Circuit "Tips" Against Tip-Pooling Policies

In a surprising decision that may require many restaurants and other hospitality businesses in the Western U.S. to alter their labor practices, the 9th Circuit Court of Appeals upheld a 2011 U.S. Department of Labor (USDOL) rule that prohibits businesses from requiring employees to share their tips even if the tipped employees are paid minimum wage. The February 23, 2016 decision applies to all businesses operating in the 9th Circuit, which includes the states of California, Nevada, Washington, Arizona, Oregon, Idaho, Montana, Hawaii, and Alaska (Oregon Rest. & Lodging Association v. Perez).

A Legal Tipping Point – Are No-Tip Policies the Wave of the Future?

In this country, there are thousands of employees who earn their living off tips or gratuities they receive from customers. Over the last several years, there has been a movement afoot, particularly in the restaurant industry, to eliminate tipping from the workplace. Most recently, Joe's Crab Shack became the first major restaurant chain to test a "no-tipping" policy at more than a dozen of its locations. Servers, hosts, and bartenders at test locations of Joe's Crab Shack are now being paid a higher, fixed, hourly wage well above the current federal minimum wage of $7.25 per hour. Joe's Crab Shack is not the only restaurant experimenting with no-tipping policies. Union Square Hospitality Group announced earlier this year that 13 of its New York City restaurants will go to a no-tipping policy. "No-tipping" restaurants are still far from the norm in the United States but it is definitely a trend to watch.

Coffee and Tipping Do Not Mix: Fifth Circuit Rejects Behind-the-Scenes Baristas’ Tip Pooling Arrangement

In Montano v. Montrose Restaurant Associates., Inc., 800 F.3d 186 (5th Cir. Aug. 28, 2015), the Fifth Circuit Court of Appeals reversed and remanded a decision of the Southern District of Texas in which the trial court had granted summary judgment in favor of a restaurant. The issue was whether it was permissible under the Fair Labor Standards Act (FLSA) for the restaurant to include a “coffeeman” (also known as a “barista”) in a mandatory tip pooling arrangement with lead waiters, front waiters, back waiters, busboys, and bartenders.

Prominent NY Restaurateur Eliminates Tipping

As New York’s hospitality industry prepares for a reduced tip credit and a fast food minimum wage, one New York restaurateur has announced its intention to eliminate tipping and thus, by extension, use of the tip credit: New York City’s Danny Meyer. This lengthy Eater feature discusses Meyer’s audacious new Hospitality Included program, noting the pitfalls encountered by other fine dining establishments which have moved away from American dining’s deep-rooted tipping conventions. Watch this space for further developments regarding NYS Department of Labor regulation of the hospitality industry and industry responses thereto.

Fifth Circuit Rules on Tip Pooling

In Montano v. Montrose Restaurant Associates, Inc., the U.S. Court of Appeals for the Fifth Circuit was presented with what may seem like an easy issue: does including a “coffeeman” in a tip pool invalidate the tip credit? The Fifth Circuit’s answer? It depends. While the court attempted to articulate a test that would provide some clarity, it may be such a fact-intensive inquiry that it does not provide employers much guidance.

'Interaction With Customers' Key to Employees' Eligibility for Minimum Wage Tip Credit, 5th Cir. Rules

A new appeals court ruling offers guidance for employers in Louisiana, Mississippi and Texas about how to determine which employees are eligible for the minimum wage tip credit.

Joining Ninth Circuit, Fourth Circuit Rejects Cause of Action to Recover Gratuities Under FLSA

In accordance with the Ninth Circuit and several other federal court rulings, the Court of Appeals for the Fourth Circuit yesterday held that an employee cannot bring a claim for wages based on allegedly misappropriated gratuities under the FLSA. Trejo v. Ryman Hospitality Props., 2015 U.S. App. LEXIS 13204 (4th Cir. July 29, 2015).

"Tipped Minimum Wage" Nonsense Continues

A recent post appearing on the U.S. Labor Department’s blog begins, “The federal tipped minimum wage has been $2.13/hour since 1991. That’s right – it’s been the same for nearly a quarter century.”

More Erroneous Nonsense on Tipped Wages, Courtesy of the Labor Dept.

A recent post appearing on the U.S. Department of Labor’s blog begins, “The federal tipped minimum wage has been $2.13/hour since 1991. That’s right – it’s been the same for nearly a quarter century.”

"Tipped Minimum Wage" Nonsense Continues

A recent post appearing on U.S. Labor Department's blog begins, "The federal tipped minimum wage has been $2.13/hour since 1991. That's right - it's been the same for nearly a quarter century."

FAQs on Compliance With the Federal Tip Credit

Many employers in the hospitality industry employ individuals who receive customer tips or gratuities in the ordinary course of their work day. These tips may serve as an offset against an employer’s minimum wage obligations under the federal Fair Labor Standards Act (FLSA)—but only if certain criteria are met.

Ongoing Confusion about Tips, Even from the White House

Recently, I explained that revising the FLSA regulations will not be easy, and highlighted tip credits as one such area in particular. In my last post, I discussed yet another case involving the miscalculation of wages for tipped employees.

The 20% Rule for Tips is Back in the News

We’ve covered tips and tip credits at length in the past here, here, here, and here, and I could probably blog all day, every day just to keep up with the volume of tip-related cases and actions that are filed nationwide, some high profile and others not. I want to highlight one of them here.

Disinformation And The "Tipped-Employee Minimum Wage"

A White House report promoting a substantial jump in the federal Fair Labor Standards Act's minimum wage perpetuates now-widely-disseminated propaganda about an alleged "tipped employee minimum wage" of $2.13 per hour.

Will Automatic Gratuities at Restaurants Be a Thing of the Past?

Automatic gratuities for large parties are commonplace in many restaurants, bars, and hotels throughout the country. However, as of January 2014, the Internal Revenue Service (IRS) now classifies these automatic gratuities as “service charges.” As a result, the automatic tips will be treated as regular wages and subject to payroll tax withholding.

Coyote Ugly Bouncers Join the Tip-Pool Dance

A federal judge in the Middle District of Tennessee recently held that bouncers (sometimes referred to as “security guards”) at Coyote Ugly Saloons were properly permitted to participate in tip pools with bartenders, barbacks, and waitresses. The holding in Stewart v. CUS Nashville, LLC turns on the Coyote Ugly bouncers’ unique job duties, which require them to have significant customer interactions that differ from the duties of most bouncers in restaurant and retail settings.

Another Celebrity Chef Runs Afoul of Tip Pooling Rules

Shortly after my co-author, Bill Pokorny, wrote about celebrity and Iron Chef Mario Batali’s multi-million dollar settlement of a class action tip pooling lawsuit, another celebrity chef here in Chicago was sued for violating tip pooling laws. In March 2012, a lawsuit was filed against Master Chef Graham Elliot by 14 former employees over tip pooling requirements at his self-titled restaurant.

Legal Alert: New Authority Concerning Tax Treatment of Tips

The Revenue Ruling discusses the assessment of employer FICA taxes on tips, including the application of section 3121(q) of the Internal Revenue Code (the "Code") and the application of the credit allowed under section 45B of the Code, but warns that it is first necessary to determine whether a payment is actually a "tip" for these purposes, noting that it makes no difference what the payment might be called. Even though described as a "tip," a payment that constitutes a "service charge" is wages, and is subject to withholding and reporting as such.

Mario Batali Restaurants Settle Tip Pool Lawsuit For $5.25 Million

The latest news in celebrity chef wage and hour litigation is that eight New York restaurants owned by Mario Batali have agreed to settle $5.25 million to settle a class action lawsuit alleging that they illegally withheld tips from hourly service workers.

Justices Deny Review of Applebee's Tip Credit Ruling

In May, my partner Staci reported on a ruling against Applebee's by the 8th Circuit Court of Appeals, holding that tipped employees who spent more than 20 percent of their working time on nontipped activities like cleaning restrooms were entitled to the federal minimum wage of $7.25 per hour. Applebee's asked the U.S. Supreme Court to review the ruling, arguing that the Eighth Circuit incorrectly deferred to the U.S. Department of Labor's "informal interpretation" of its FLSA regulations in its 1988 Field Operations Handbook, and that as a result it applied an "utterly unworkable standard that has no basis in the text or purpose of the FLSA and that will impose crushing administrative and financial burdens on restaurants and other employers of tipped employees." Last week, the Supreme Court turned down Applebee's petition, leaving the Court of Appeals' ruling intact.

Supreme Court Refuses "Tip Credit" Appeal

In a move that could have a significant impact on employers with tipped employees, the Supreme Court rejected an appeal over "tip credit" practices.

The Future of Tip Credit – And The Businesses That Depend Upon It

The U.S. Supreme Court is being asked to decide what amounts to the future of tip credit for many businesses – particularly in the hospitality industry. In short, the issue is whether an employer can continue to pay tip credit employees on a tip credit basis if they spend more than 20% of their work time on duties that did not produce tips.

Is Your "Tip Credit" A Time Bomb?

Section 3(m) of the federal Fair Labor Standards Act allows a portion of the employee's FLSA-required minimum wages to consist of tips. Unfortunately, it is all-too-common for employers to make expensive mistakes where tips are concerned.

Wage and Hour Division Issues New Regulations Affecting Tip Credits

New regulations issued by the Wage and Hour Division of the Department of Labor (DOL) interpreting the Fair Labor Standards Act (FLSA) recently went into effect; but the National Restaurant Association (NRA) and other industry groups are challenging the regulations.

Restaurant Association Sues to Block Tip Credit Rules

On April 5, 2011, the U.S. Department of Labor published new final regulations that among other things require employers to give new detailed notices to tipped employees in order to credit tips toward the minimum wage. The new regulations took effect on June 5, 2011. Yesterday, June 16, 2011, the National Restaurant Association, the Council of State Restaurant Associations and the National Federation of Independent Businesses filed a lawsuit against the DOLseeking to block enforcement of the new rules. National Restaurant Association v Solis (PDF).

DOL's New Tip-Credit Interpretations

The federal Fair Labor Standards Act's "tip credit" was among the many topics addressed by the U.S. Labor Department's recent final rule. DOL's tip-related pronouncements are a mixed-bag for employers.

USDOL Changes Tip-Credit Interpretations

The federal Fair Labor Standards Act's "tip credit" was among the many topics addressed by the U.S. Labor Department's recent Final Rule. DOL's tip-related pronouncements are a mixed-bag for employers.

Bill Would Compel Higher Cash Wages For Tipped Employees

A bill introduced recently by U.S. Representative Donna Edwards (D. Md.) would amend the federal Fair Labor Standards Act to require many employers to boost their direct cash payments to tipped employees by 76% within 90 days after passage, even though these employees are already receiving (by law) at least the FLSA minimum wage in combined tips and cash wages. A year later, the cash-wage requirement would be $5.00 (135% higher than the current level). In two years, the figure would increase to $5.50 (158% higher than today) or 70% of the FLSA minimum wage, whichever is more. H.R. 631 would be known as the WAGES Act ("Working for Adequate Gains for Employment in Services").

Are Your Tipped Employees Doing Tipped Work?

The wage and hour laws are outdated and compliance is exceedingly difficult in light of the way in which most hotels and restaurants are required to operate. But, you already knew these facts. Recent tip credit and tip pooling cases continue to highlight the problems and we will be addressing tipped employee issues in this and future editions of the Hospitality eAuthority.

Hospitality Labor Letter: Sailing Away With the Tips.

Cutting into potential profits, New York's highest court rules that restaurants may not pocket mandatory service charges that are represented to customers as gratuities for the wait staff.

Implications in Applebee's Case Still Worrying the [Hospitality] Industry.

In our October/November issue, we reported on a troubling interim decision by a federal district court judge in Missouri. The case involved pay for bartender Gerald Fast, and focused on two issues: whether the restaurant's automated timekeeping resulted in off-the-clock work (referred to as "Appletime"); and whether the restaurant unlawfully applied the federal tip credit to non-tipped work the bartender was required to do, in addition to his other duties.

Is $2.13 An Hour Enough? Higher State Minimum Wage Rates Impact Tip Credit.

With employers making adjustments in their payroll systems, some of those in the hospitality industry are wondering how a state’s higher minimum wage rate impacts the tip credit.

Is $2.13 An Hour Enough? Higher State Minimum Wage Rates Impact Tip Credit.

Many employers are nervously awaiting the possibility of a new federal minimum wage under the FLSA, while others must deal with increases already passed at the state level.

Both Workers and Employers Should Know Tip-Pooling Laws.

Tip pooling is a way of life in certain establishments. Tip-oriented businesses from restaurants to golf courses can, under the law, require tipped employees to share that money with other employees.
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