The laws and regulations that cover employee pay change with some regularity and can be quite complex. Regulations about overtime and the minimum wage laws have seen a lot of publicity recently, especially as it relates to attempts to raise the minimum wage. One area that does not see a lot of mention in the press are the rules that apply specifically to tipped employees.
Difficulties With Meeting Minimum Wage For Business Owners
Employers are permitted in many states, including Pennsylvania, to pay tipped employees a lower minimum wage. In Pennsylvania, the tipped employee minimum wage is currently $2.83 an hour, more than $4 an hour less than the regular minimum wage. Employers must make up the difference for any employee between the tipped minimum wage and the regular minimum wage if the employee does not earn enough tips to reach the regular wage during a shift. Obviously, accurately tracking compliance with this law requires employers to track how much in tips servers are making per night. This is easy when customers pay with credit cards but significantly harder when servers or other tipped employees are paid in cash.
Issues With Tip Pools
Many states also allow employers to pool the tips received by tipped employees. Tip pools have a number of specific rules that apply to them. Philadelphia has passed a specific Gratuity Protection Bill which outlaws a number of practices in relation to gratuities. While that law allows tip pools, it prohibits tip pools from paying out tips to non-service employees. It also prevents employers from deducting any fees or expenses from a service employees’ tips.
Class Action Lawsuits
These issues have led to a number of lawsuits in the past two or three years. Both Zahav, a fine dining restaurant in Philadelphia, and Red Robin, a national burger franchise, have faced class action lawsuits from servers for violation of the Philadelphia Gratuity Protection Bill. Zahav recently settled a lawsuit for over three hundred thousand dollars ($300,000) based on requiring servers to share their tips with non-service employees such as silverware polishers.
Are Shared Tips Going Too Far?
A Red Robin franchisee settled a similar lawsuit in December 2015 for one million three hundred thousand dollars ($1,300,000) based on allegations that servers had to share their tips with expeditors, kitchen workers who assist in food preparation. That lawsuit included a specific allegation that the franchisee engaged in the practice in order to pay their expeditors the tipped minimum wage rather than the full minimum wage.
Compliance Is Good For Business
The size of these settlements highlight the need for businesses to pay attention to these laws and ensure they comply with them. Six and seven figure settlements can put a real dent in a company’s viability or profitability. Employers must stay abreast of all legal requirements for the pay and treatment of their employees and do everything in their power to ensure compliance.
