Can Employer Apply Tip Credit to Hours of Nontipped Work?

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By Howard Perlman

“You mistakenly used the tip credit and didn't pay us a full cash minimum wage for the hours when you made us work on jobs that weren't related to our main role as servers,” said Sonny, a former restaurant employee. “We didn't receive tips for those other tasks. You owe us the amount of cash minimum wages you didn't pay us for that work.”

“All the work that didn't directly involve waiting tables and serving food was related enough to your role as a server,” said Miles, a dining company manager. “We were within out rights to apply the tip credit to all your hours worked, even though you didn't receive tips for some of that work.”

FACTS: A restaurant server whose primary duties included waiting tables and serving food to customers worked at three restaurants owned by a dining company.

The company provided servers with a handbook when they were hired and affixed posters regarding the tip credit in commonly used areas within their restaurants. The handbook identified that the company would apply a tip credit on wages up to the maximum amount allowed under federal and state law.

The server agreed with the company that his tips each month for his work as a server enabled the tip credit to be applied for his hours worked performing the primary duties of his job. However, the server thought it was unlawful that the company applied the tip credit to hours he worked performing tasks for which he was not regularly tipped.

Additional servers joined the server in a class action lawsuit for back minimum wages under the Fair Labor Standards Act and their state's minimum wage law for hours when they worked on tasks other than their tipped primary duties.

Nontipped work assigned to the servers included preparing some food, placing silverware and napkins on tables, restocking some items, cleaning drink machines and occasionally cleaning brass in the front of one of the restaurants. The servers and dining company agreed that the servers did not perform maintenance or janitorial work, such as cleaning bathrooms, vacuuming floors or washing windows.

The servers and dining company also agreed that the servers did not spend more than 20 percent of their work hours performing tasks other than their primary duties.

The servers considered their nontipped work to have been unrelated to their primary duties. The servers said that because tasks other than their primary duties typically would have been performed by a cook, expediter or janitor for at least the minimum wage without tips, these tasks consequentially are unrelated to their primary duties as servers.

The dining company considered the nontipped work that the servers were assigned to have been sufficiently related to the servers' primary duties to justify the tip credit for all their hours worked.

A motion for summary judgment was filed by the dining company.

ISSUE: Did the dining company properly apply the tip credit?

DECISION: The dining company's application of a tip credit for the servers' hours worked performing tasks other than their primary duties was allowed under federal and state law, a federal district court said.

Minimum wage compensation for employees whose jobs are associated with customary receipt of tips can be reduced by a tip credit for hours worked performing tasks other than their primary duties if those tasks are sufficiently related to performance of those primary duties, the court said.

Even viewed in a light most favorable to the servers, the side work tasks performed by the restaurant servers were incidental to their primary duties, the court said.

There was no indication that the servers were “routinely assigned to maintenance,” the court said. When the related duties were performed intermittently and as part of the primary occupation, such as those described in the case, the related duties were subject to the tip credit, the court said (Shaefer v. Walker Bros. Enters., Inc., N.D. Ill., No. 1:10-cv-06366, 12/17/14).

POINTERS: Employees in occupations customarily associated with receipt of tips and that spend more than 20 percent of their work hours performing maintenance or janitorial work must be paid at least the minimum wage without applicability of a tip credit for hours performing the maintenance or janitorial work, according to Reg. 531.56(e) of the federal Labor Department's Field Operations Handbook.

The FLSA enables employers to apply a tip credit to an employee's wages only if that employee customarily and regularly receives at least $30 each month in tips. However, employees that perform one set of primary duties for which they customarily and regularly receive tips and another set of primary duties for which they do not can have a tip credit applied only to hours they worked performing the set of primary duties for which they customarily and regularly receive tips and hours worked performing tasks sufficiently related to those primary duties.

For more information, see Payroll Administration Guide's “FLSA Minimum Wage Rules” chapter.

This analysis illustrates how courts resolve pay-related disputes. The names and dialogue are fictitious.