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What are Tipped Employees Rights under the FLSA?

Posted on September 1, 2020 by Rose H. Robbins, Esq.

Tipped employees are those who customarily and regularly receive more than $30 per month in tips. Tips are the property of the employee and the employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool. Only tips actually received by the employee may be counted in determining whether the employee is a tipped employee and in applying the tip credit.

What is a tip credit?   

Section 3(m) of the FLSA permits an employer to take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (which must be at least $2.13) and the federal minimum wage. Thus, the maximum tip credit that an employer can currently claim under the FLSA section 3(m) is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13). Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.

What is a tip pool?  

The requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), bussers, and service bartenders. A valid tip pool may not include employees who do not customarily and regularly received tips, such as dishwashers, cooks, chefs, and janitors.

 What are the requirements for a tip credit to be considered valid?

  The employer must provide the following information to a tipped employee before the employer may use the FLSA 3(m) tip credit:

1)the amount of cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;

2)the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25);

3)that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;

4)that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

5)that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.

The employer may provide oral or written notice to its tipped employees informing them of items 1-5 above. An employer who fails to provide the required information cannot use the section 3(m) tip credit and therefore must pay the tipped employee at least $7.25 per hour in wages and allow the tipped employee to keep all tips received.

Employers electing to use the tip credit provision must be able to show that tipped employees receive at least the minimum wage when direct (or cash) wages and the tip credit amount are combined. If an employee’s tips combined with the employer’s direct (or cash) wages of at least $2.13 per hour do not equal the minimum hourly wage of $7.25 per hour, the employer must make up the difference.

Employee Retention of Tips: A tip is the sole property of the tipped employee regardless of whether the employer takes a tip credit. 1 The FLSA prohibits any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. For example, even where a tipped employee receives at least $7.25 per hour in wages directly from the employer, the employee may not be required to turn over his or her tips to the employer.

Employee Tip Pooling: As noted above, the requirement that an employee must retain all tips does not preclude a valid tip pooling or sharing arrangement among employees who customarily and regularly receive tips. The FLSA does not impose a maximum contribution amount or percentage on valid mandatory tip pools. The employer, however, must notify tipped employees of any required tip pool contribution amount, may only take a tip credit for the amount of tips each tipped employee ultimately receives, and may not retain any of the employees’ tips for any other purpose.

Employee Dual Jobs: When an employee is employed by one employer in both a tipped and a non-tipped occupation, such as an employee employed both as a maintenance person and a waitperson, the tip credit is available only for the hours spent by the employee in the tipped occupation. The FLSA permits an employer to take the tip credit for some time that the tipped employee spends in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips. For example, a waitperson who spends some time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is considered to be engaged in a tipped occupation even though these duties are not tip producing. However, where a tipped employee spends a substantial amount of time (in excess of 20 percent in the workweek) performing related duties, no tip credit may be taken for the time spent in such duties. This circumstance is the basis of much litigation.  In Rafferty v. Denny’s, Inc., Case No. 1:19-CV-24706-DLG (S.D. Fla. Aug. 3, 2020), the plaintiffs sought to bring a nationwide collective action covering all of the company-owned Denny’s restaurants across the United States.  The Court ruled on Plaintiff’s Motion for Conditional Certification of FLSA Collective Action and to Permit Notice and Equitable Tolling. The Court denied certification based on the following two considerations.  Firstly, the Court stated,  “Taking into consideration the small number of class members provided by the Plaintiff, and the large size of the class Plaintiff seeks to certify, the Court finds that Plaintiff has made an insufficient showing of willingness from others to join the suit.” Secondly, the Court found, “The Court finds that Plaintiff is not similarly situated to the members of the proposed nationwide class of 8400 Denny’s servers. Plaintiff does not identify a uniform corporate-wide policy that violates FLSA. Instead, the class of employees which Plaintiff seeks to represent contains individual employees who have worked at different restaurants, in different states, for different managers, and, most likely, in quite different working conditions. Granting Plaintiff’s Motion would defeat the aim of judicial efficiency that class action suits were created to promote.”

Service Charges to Customers: A compulsory charge for service, for example, 15 percent of the bill, is not a tip. Such charges are part of the employer’s gross receipts. Sums distributed to employees from service charges cannot be counted as tips received, but may be used to satisfy the employer’s minimum wage and overtime obligations under the FLSA. If an employee receives tips in addition to the compulsory service charge, those tips may be considered in determining whether the employee is a tipped employee and in the application of the tip credit.

Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, the employer may pay the employee the tip, less that percentage. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA. However, this charge on the tip may not reduce the employee’s wage below the required minimum wage. The amount due the employee must be paid no later than the regular pay day and may not be held while the employer is awaiting reimbursement from the credit card company.

What are some typical problems in the tipped employee situation?

Minimum Wage Problems:

  • Where an employee does not receive sufficient tips to make up the difference between the direct(or cash) wage payment (which must be at least $2.13 per hour) and the minimum wage, the

employer must make up the difference.

  • Where an employee receives tips only and is paid no cash wage, the full minimum wage is owed.
  • Where deductions for walk-outs, breakage, or cash register shortages reduce the employee’s wages below the minimum wage, such deductions are illegal. When an employer claims an FLSA 3(m) tip credit, the tipped employee is considered to have been paid only the minimum wage for all non-overtime hours worked in a tipped occupation and the employer may not take deductions for walkouts, cash register shortages, breakage, cost of uniforms, etc., because any such deduction would reduce the tipped employee’s wages below the minimum wage.
  • Where a tipped employee is required to contribute to a tip pool that includes employees who do not customarily and regularly receive tips, the employee is owed the full $7.25 minimum wage and reimbursement of the amount of tips that were improperly utilized by the employer.

Overtime Problems:

  • Where the employer takes the tip credit, overtime is calculated on the full minimum wage, not the lower direct (or cash) wage payment. The employer may not take a larger FLSA 3(m) tip credit for an overtime hour than for a straight time hour. Under certain circumstances, an employer may be able to claim an additional overtime tip credit against its overtime obligations.
  • Where overtime is not paid based on the regular rate including all service charges, commissions, bonuses, and other remuneration.

The determination of whether improper compensation deductions have occurred in any circumstance is best made by an experienced attorney. Call attorney Rose H. Robbins at (954) 946-8130 for a FREE  telephone consultation about your claim for minimum wage or unpaid overtime wage violations.

Or you can complete the simple form below for confidential submission to our office.  Please be advised that by merely submitting this form, no Attorney-Client relationship is formed with this law firm.   You must provide your name,  home or cell phone number, your email address and your zip code in the form.  We serve the following counties: Broward, Highlands, Indian River, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Lucie.

 

 

 

Overtime Pay Laws for Inside Retail Sales Employees

What are Some Typical Overtime Pay Problems for Inside Retail Sales Employees?

Posted on August 21, 2020 by Rose H. Robbins, Esq.

#1     Hours Worked: Employers must record and pay for all hours worked by employees including any time controlled by the employer, such as time spent “engaged to wait.” Where employees report to work at their scheduled time, the employer must begin counting that as work time. However, if the employer immediately tells the employees that they are not needed, completely relieves them of duty, and gives them a specific report-back time which enables the employees to use the time for their own benefit, this time does not have to be counted as working time. If employees are only told to wait until they are needed, and are not given a specific report-back time that is long enough to use for their own benefit, all of the waiting time is to be counted as hours worked.

#2     Illegal Deductions: Deductions made from employees’ wages for such items as cash or merchandise shortages, required uniforms, and tools of the trade are not legal to the extent that they reduce the wages below the statutory minimum wage or reduce the amount of overtime pay.

#3      Salaried Employees: A salary, by itself, does not exempt employees from the minimum wage or overtime. Whether employees are exempt from minimum wage and overtime depends on their job duties and responsibilities, as well as the salary paid. Often, in retail businesses, salaried employees do not meet all the requirements specified by the regulations to be considered as exempt from overtime pay. The regulations at 29 CFR Part 541 contain a discussion of the requirements for several exemptions under the FLSA including outside salespersons.

#4      Employees Paid on a Straight Commission Basis or Get Commission in Addition to their Regular Hourly or Salary Pay: Unless an exemption applies, commissions need to be included when calculating the regular rate of pay for overtime purposes. Two different overtime pay exemptions may come into play for employees who are paid commission: the commission sales exemption, commonly referred to as the 7(i) exemption; and the outside sales exemption.

Note: The general rule is that inside sales persons who are not otherwise exempt are entitled to minimum wage and overtime pay. Inside sales include the employer’s office and the employee’s home office. A retail establishment is an establishment 75% of whose annual dollar volume of sales is not for resale and is recognized as retail in the particular industry. 29 CFR Part 779. Covered, non-exempt retail establishments are required to pay minimum wage and overtime to covered, non-exempt employees.

 

The determination of whether you qualify for FLSA minimum wage and overtime pay is best made by an experienced attorney. Call attorney Rose H. Robbins at (954) 946-8130 for a FREE  telephone consultation about your claim for minimum wage or overtime pay violations.

Or you can complete the simple contact form below for confidential submission to our office.  Please be advised that by merely submitting this form, no Attorney-Client relationship is formed with this law firm.   You must provide your name,  home or cell phone number, your email address and the zip code where you work on the form.  We serve the following South Florida counties: Broward, Highlands, Indian River, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Lucie.

 

 

 

Are direct care domestic workers entitled to FLSA minimum wage and overtime pay?

Posted on August 11, 2020 by Rose H. Robbins, Esq.

Caregivers may be entitled to minimum wage and overtime pay. Find out if you might qualify using this simple  4-question checklist. You should consult an experienced employment FLSA lawyer to find out how these 4 points apply to your individual circumstances. The Law Office of Rose H. Robbins offers a free case analysis by telephone : (954) 946-8130

#1     Are you employed by anyone other than the person you assist or that person’s family or household (for instance, a home care agency or other entity)?

IF ANSWER YES:  You must receive at least the federal minimum wage and overtime pay if you are employed or jointly employed by any employer other than the person receiving your services or that person’s family or household. That other employer (rather than the person, family, or household) is responsible for ensuring that you receive the federal minimum wage and overtime pay for all hours worked. There’s no need for you to answer any further questions.

IF ANSWER NO: Then continue on.

#2     Do you provide domestic services that are primarily on behalf of other members of the household, such as doing laundry for another family member or preparing meals for someone other than the person being assisted?

IF ANSWER YES: You must be paid at least the federal minimum wage and overtime pay in any workweek when you perform domestic work that is primarily for the benefit of others besides the person being assisted. There’s no need for you to answer any further questions.

IF ANSWER NO: Then continue on.

#3     Do you provide medically related services that typically require and are performed by trained medical personnel? These are services that may be invasive, sterile, or otherwise require exercising medical judgment, such as assisting with tube feeding or catheter care.

IF ANSWER YES: You must be paid at least the federal minimum wage and overtime pay in any workweek when you perform medically related services that typically require trained medical personnel (like a licensed practical nurse, certified nurse assistant, etc.). Even if you haven’t had the required training or have a different job title, you are still covered by the minimum wage and overtime pay protections if performing these services. There’s no need for you to answer any further questions.

IF ANSWER NO: Then continue on.

#4    Do you spend more than 20% of your time in a workweek assisting with activities of daily living (ADLs) (such as dressing, grooming, feeding, bathing, toileting, and transferring) or instrumental activities of daily living (IADLs) (such as meal preparation, driving, light housework, managing finances, assisting with the physical taking of medications, and arranging medical care)?

IF ANSWER YES: You must be paid at least the when you spend more than 20% of your time assisting with activities of daily living (ADLs) or instrumental activities of daily living (IADLs).

IF ANSWER NO: Then you may not qualify for the federal minimum wage and overtime pay.

The determination of whether you qualify for FLSA minimum wage and overtime pay is best made by an experienced attorney. Call attorney Rose H. Robbins at (954) 946-8130 for a FREE  telephone consultation about your claim for minimum wage or overtime pay violations.

 

 

 

 

Or you can complete the simple contact form below for confidential submission to our office.  Please be advised that by merely submitting this form, no Attorney-Client relationship is formed with this law firm.   You must provide your name,  home or cell phone number, your email address and the zip code where you work on the form.  We serve the following South Florida counties: Broward, Highlands, Indian River, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. Lucie.