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Employees in a restaurant setting are often tipped, and employers often take a “tip credit” toward the minimum wage they have to pay (allowing the employer in Arkansas to pay $2.63/hour to the tipped employee if the employee is tipped at least $8.37 per hour in tips to make up the difference between $2.63/hour and the Arkansas minimum wage of $11.00/hour). “Tip pooling” is another common practice, where all tips are collected and then distributed equally among restaurant employees. However, if employers choose to implement a tip pool or tip credit, they should consider the following guidelines to ensure their tip policy complies with the FLSA.
Can non-tipped employees be paid from a tip pool?
An employer who does No taking a tip credit (i.e., paying all employees directly at least $11.00 per hour, regardless of the amount of tips received) can allow non-tipped employees, such as cooks and dishwashers, to participate in a group tips. This type of tip pool has one limitation: managers and supervisors are prohibited from participating in the tip pool.
What if the employer takes a tip credit?
If an employer chooses to take a tip credit, the guidelines become much more complicated. An employer that takes a tip credit may only allow employees who customarily and regularly receive tips to participate in the tip pool. This means that those employees who do not normally receive tips, such as cooks, cannot participate in the tip pool.
What if the tipped employee performs work that is not normally tipped?
Even if an employer decides to take a tip credit and limit the tip pool to those employees who habitually receive tips, the employer must be very careful to meet the requirements for a tip credit. The general rule is that an employer can only take a tip credit for an employee in a tipped occupation. So how is tip credit calculated when a server (a traditional tipped occupation) performs other functions while on the job? The Department of Labor’s Dual Jobs Rule provides guidance for this question.
A tipped occupation includes work that (1) produces tips and (2) directly supports tipped work if the supporting work is not performed for a “substantial amount of time.” Direct support work is defined as “work performed by a tipped employee in preparation for or otherwise assisting in tipping customer service work.” Direct support work is performed a “substantial amount of time” if (1) it exceeds 20 percent of the hours in a week for which the employer has taken a tip credit or (2) the employee performs direct support over a continuous period. time exceeding 30 minutes. If support work exceeds 30 minutes, it cannot be taken as part of the tip credit; however, this amount is excluded from the 20 percent calculation.
The rule provides the following examples of work that produces tips:
A server’s tipping job includes providing table service, such as taking orders, making recommendations, and serving food and drink. A bartender’s tipping job includes preparing and serving drinks, talking to customers at the bar, and, if the bar includes food service, serving food to customers.
A waiter’s tip production work includes assisting waiters with their tip production work for customers, such as table service, including filling water glasses, cleaning dishes from tables, collecting and delivery of items to and from tables and table service, including changing linens and setting tables.
The rule provides the following examples of direct support work:
A server’s direct support work includes dining room prep work such as refilling salt and pepper shakers and ketchup bottles, rolling cutlery, folding napkins, sweeping or vacuuming under tables in the dining area, and setting and cleaning the tables. A busboy’s direct support work includes prep work before and after table service, such as folding napkins and rolling cutlery, stocking the busboy station and vacuuming the dining room, as well as cleaning soda machines, ice dispensers, food warmers and other equipment in the service alley. A bartender’s direct support work includes work such as slicing and pitting fruit for drinks, cleaning the bar or tables in the bar area, cleaning glasses at the bar, stocking bottles at the bar, fetching liquor and supplies They vacuum under the tables in the bar area. , cleaning ice coolers and bar mats, preparing drink mixes, and filling dispensers with drink mixes.
Work that is not part of the tipped occupation is any work that does not provide service to customers for which the employee receives tips and does not directly support the tipping activity. An employer can never take a tip credit for this time. The following examples illustrate work that is not part of the tipped occupation because the work does not provide service to customers for which tipped employees receive tips and does not directly support tipped work. This list is illustrative and not exhaustive.
Food preparation, including salads, and kitchen or bathroom cleaning are not part of a waiter’s tipped occupation. Cleaning the dining room or bathroom is not part of a bartender’s tipped occupation. Cleaning the kitchen or bathrooms is not part of a busboy’s tipped occupation.
Therefore, if an employer chooses to take a tip credit, it must ensure that it (1) never takes a tip credit for time the employee spends working outside of the tipped occupation, (2) never takes a direct tip credit: support work that lasts more than 30 minutes, and (3) closely monitors that tipped employers perform no more than 20 percent of direct support work during a workweek.
If this sounds complicated, it is. Employers who choose to take a tip credit must remain vigilant to ensure that those who customarily and regularly perform a tipped occupation almost exclusively perform tasks that fall within the duties of a tipped occupation. If a tip credit or tip pool is not properly implemented, the employer could risk civil money penalties assessed by the Department of Labor and be subject to lawsuits for violations of the Fair Labor Standards Act.
Sources:
29 CFR § 531.50
Republished with permission. Originally published in the Arkansas Labor Law Charter.
Source: www.jdsupra.com