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Devour These Bites of Advice

Devour These Bites of Advice

A labor and employment practice attorney offers valuable tips on tipping guidelines and more.

As a restaurant operator, understanding the various employment laws is important to the viability of your restaurant. Failing to comply with these laws can result in hefty fines and potential lawsuits from employees. Below are the three most common and problematic employment issues for restaurateurs.  

Tip Credit 

The Fair Labor Standards Act recently was amended to prohibit employers from requiring employees to share their tips with the employer, including any managers or supervisors, whether or not the employer takes a tip credit. This is significant because it means an employer can now violate the FLSA through an improper tip pooling arrangement, even if it is paying employees the full minimum wage.  

For employers who take a tip credit, nothing changes. Employers cannot retain any tips paid to employees, except as part of a valid tip pooling arrangement, which may not include management or supervisory employees, or other employees who do not customarily and regularly receive tips. For employers who do not take a tip credit, they must now ensure that managers and supervisory employees are excluded from any tip pooling arrangement.   

Minimum Wage and Overtime 

Employers of tipped employees must pay a cash wage of at least $2.13 per hour if they claim a tip credit against minimum-wage obligations. While a restaurant can pay $2.13 an hour for the server’s first 40 hours worked per week, overtime cannot be calculated at one-and-a-half times $2.13.  

In calculating the overtime rate for the tipped employee, the restaurant must multiply the minimum wage (currently at $7.25/hour, but states and municipalities may have a higher rate) by 1.5, subtract the federal tip credit ($5.12 per hour), multiply that figure by the number of overtime hours worked, and then add that sum to the 40-hour total. 

Employee Misclassification Issues

Exempt employees (i.e. employees paid a salary and perform certain qualifying duties) are not entitled to overtime pay when they work more than 40 hours in a workweek. Generally, a restaurant’s general manager (and possibly other management-level employees) will qualify as exempt.  

Almost all other restaurant employees, however, should be treated as non-exempt and receive overtime pay when working more than 40 hours in a workweek (or daily overtime if required by state or local law). Nevertheless, restaurants sometimes incorrectly classify non-exempt employees as exempt, thereby creating significant potential liability. To avoid this pitfall, restaurants should audit their current employee classifications to ensure compliance with applicable wage and hour laws.

Attorney Scott Cruz is a member of the Labor and Employment Practice Group of Clark Hill PLC. [These are his opinions and not those of Restaurant Inc. or Reinhart Foodservice and its subsidiaries.]

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