Servers getting ripped off on tips
Pay problems are common in restaurants and bars, as employers try to cut corners in paying tipped employees. A recent case involving Coyote Ugly shows some of the more common issues.
Many restaurant managers and owners don't understand how the minimum wage and overtime laws apply to their customer servers. The federal minimum wage of $7.25 per hour - and overtime requirements - apply to servers. This means they have to track hours actually worked, and have to pay for every work week at least the minimum wage, as well as overtime for hours over 40. However, if the servers receive tips, the employer can take a
tip credit to offset some of this amount. But there are detailed rules for this, and if they aren't followed the whole credit is invalid and the total $7.25 per hour is owed on top of all the tips. Here is how the tip credit is supposed to work:
- The employer must notify employees in advance of the tip credit rules
- The employer must keep accurate records of the amount of tips received in addition to hours actually worked
- The employer must pay at least $2.13 per hour of its own money - in other words, the maximum "tip credit" toward the minimum wage is $5.12 per hour
- Any week that tips are too low to meet the minimum wage, the employer must make up the difference by increasing hourly pay
- The employer cannot take any of the tips, except that
- The employer can create a "tip pool" to share tips with other employees, but only if advance notice is given, the terms are clear, and every single employee in the tip pool is of the type that
customarily and regularly receive tips,such as waiters, bartenders and bussers. Usually dishwashers, cooks, chefs, janitors, managers and owners cannot be included in the tip pool.
If the employer breaks any of these rules the whole tip credit is invalid.
At Coyote Ugly, the bartenders and watresses had to share tips with security guards, and they argued that this was an invalid tip pool. The District Court disagreed. It found that in the unique environment at Coyote Ugly, security was part of the show, interacting with customers and entertaining them. This included
barking in the street, flyering along with bartenders, wearing silly wigs and shouting quips to bring in customers like
hot beer, cold women! They dance with customers and sometimes perform choreography with bartenders. For this reason, the Court found them validly included in the tip pool
But Coyote Ugly still lost a significant part of the lawsuit because the company had forced employees to work off the clock - for example, where bartenders spent time in photo-shoots for the swimsuit calendar without hourly pay. Most troubling of all, though, was the evidence that the company deliberatly falsified time and attendence records to avoid paying for all the time worked.
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