Friday, September 4, 2020
Matthew Miller-Novak (Barron Peck Bennie & Schlemmer) sends this guest post describing a recent case:
Restaurants should proceed with caution when handling their employees’ tips. Recently, an Ohio bartender filed a class action against Local Cantina in the Southern District of Ohio for violations of the Fair Labor Standards Act (“FLSA”). See, Smith v. Local Cantina, LLC et al, Case No: 2:20-cv-03064 (S.D. Ohio 2020). The lawsuit alleges that: (1) Local Cantina paid its frontline workers a salary of $1,000 a week but failed to pay them overtime rates; and (2) Local Cantina took all the servers’ tips for itself. Although Local Cantina argues that its servers made more money in this manner, Local Cantina’s decision was likely not lawful.
First, it is well established that a salary alone does not exempt an employee from the overtime requirements of the FLSA. For example, an employee does not fall under the “administrative exemption” unless she has managerial duties with independent decision-making authority. Thus, a waiter or bartender is not exempt from overtime rates regardless of her salary’s size. Regarding the employees’ tips in this case, the FLSA does permit restaurants to institute tip-sharing systems (with proper notice). However, the “Consolidated Appropriations Act, 2018,” which Congress passed, and President Trump signed on March 23, 2018, amended the FLSA’s tip-sharing rules. The amendment expressly stated that employers and managers are not permitted to take employees’ tips. Therefore, under the new language of the FLSA, employers cannot take an employee’s tips for itself or its managers regardless of whether the employer takes the minimum wage tip credit or pays the tipped-employee an amount equal or greater than the minimum wage.
Therefore, regardless of how much an employer pays a customarily-tipped employee, the employer should always pay time-and-a-half for overtime hours, and the employer should not help itself to its employees’ tips or give those tips to its managers.