A comprehensive look at the tip wage
From Compensation & Benefits Review
Employers increasingly face wage and hour enforcement actions and costly class action lawsuits under the federal and state laws that regulate minimum wages and tipping. With wide variations in federal and state requirements regarding tip credits, tip pooling and service charges, companies must carefully review their policies to avoid labor department investigations and significant liabilities for back pay.
This article considers the tip credit – the amount of tips that may be applied toward the required minimum wage. It outlines common employer practices and pitfalls in calculating pay and overtime pay for tipped employees and keeping records for wages and hours. A number of steps have been advised that employers can take to ensure that their pay practices are legal, to avoid lawsuits that can generate multi-million-dollar settlements, Abstract
The Fair Labor Standards Act allows an employer to count tips received by employees as a credit toward the employer’s minimum wage requirements. This practice is especially prevalent in the restaurant and hospitality industry. In the past, some employers have been lax in their understanding of and compliance with the complicated regulations surrounding the tip wage and tip-pooling arrangements. Recently, however, employers have been hit with wage and hour investigations and legal actions and found themselves subject to significant liability. Employers, both large and small, are regularly shocked and amazed to find out that the wage policies they have had in place for years without any problem are in fact illegal and that they are now faced with paying doubled back wages for a 2-year and sometimes 3-year period. This article describes the regulations and how employers can avoid the pitfalls.
Article details
Title: A comprehensive look at the tip wage
Athours: Terrence Bouvier Robinson
From: Compensation & Benefits Review
DOI: 10.1177/0886368711407995
Tags: Fair Labor Standards Act, tip pooling, tip wages, wage and hour law
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