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Here is a good article about how NOT to use tip credit to save on labor costs:
Servers and Bartenders Underpaid–Pooled Tips Partially to Blame
http://tacoma.injuryboard.com/miscellan … eid=252344
Mr. Bernal worked at a series of Texas bars. Tips from customers that were placed in a tip pool and distributed among all employees including managers. Mr. Bernal’s base hourly rate of pay was less than federal minimum wage, and did not receive time and a half pay for overtime.
Mr. Bernal instituted a class action. He alleged violations of the Fair Labor Standards Act (“FLSA”). The FLSA establishes a minimum hourly wage and overtime requirements.
However, some employers are permitted to pay employees less than the minimum wage if the employees receives tips that, when added to their hourly wage, amount to more than the statutory minimum. This practice, known as taking a “tip credit,†is only permitted if the employer has informed the employees of the tip credit provisions and if the employees retain all tips.
The Court held:
Here is what the DOL says about tip pooling:
http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf
http://www.dol.gov/esa/whd/flsa/
Servers and Bartenders Underpaid–Pooled Tips Partially to Blame
http://tacoma.injuryboard.com/miscellan … eid=252344
We are seeing more and more cases involving unpaid wages. Along those lines an interesting case out of Texas called Bernal v. Vankar Enterprises, Inc.November 30, 2008 - 11:05 AM
Mr. Bernal worked at a series of Texas bars. Tips from customers that were placed in a tip pool and distributed among all employees including managers. Mr. Bernal’s base hourly rate of pay was less than federal minimum wage, and did not receive time and a half pay for overtime.
Mr. Bernal instituted a class action. He alleged violations of the Fair Labor Standards Act (“FLSA”). The FLSA establishes a minimum hourly wage and overtime requirements.
However, some employers are permitted to pay employees less than the minimum wage if the employees receives tips that, when added to their hourly wage, amount to more than the statutory minimum. This practice, known as taking a “tip credit,†is only permitted if the employer has informed the employees of the tip credit provisions and if the employees retain all tips.
The Court held:
- The Bars violated their minimum wage obligations by failing to inform employees of the tip credit provisions, by requiring employees to cover cash register shortages and unpaid tabs, and by requiring employees to participate in tip pools which distributed tips to managers and janitors.
- The Bars violated the FLSA by failing to pay appropriate overtime wages.
Here is what the DOL says about tip pooling:
http://www.dol.gov/esa/whd/regs/compliance/whdfs15.pdf
Learn more about minimum wage laws here:Tip Pooling: 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), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.
http://www.dol.gov/esa/whd/flsa/