Whether you operate a standalone diner or multiple, fast casual restaurant franchises, pay attention to this potential wage exposure.
Do you have to pay servers minimum wage?
Maybe. A federal appeals court in California has determined that servers, bartenders and other tipped employees are entitled to receive full minimum wage when they are engaged in tasks that do not provide tipping opportunities. This can include, for example, pre-service set-up or post-service clean-up.
At issue in the case in question, Alec Marsh v. Alexander’s LLC, is a federal law that permits employers to pay “front-of-the-house,” service employees less than minimum wage, when the tips for service they receive will bring their wages to equal minimum wage. The United States Court of Appeals for the Ninth Circuit disagrees with the feds, saying that employers cannot apply this “tip credit” to the time spent on tasks for which the employees do not receive tips.
No tip credit for non-tipped work
According to the Appeals Court decision, Marsh and 13 other former servers and bartenders alleged that their employers abused the tip credit pay standard by paying them the reduced wage for non-tippable work. They assert that their employers paid them at the “tipped wage” rate when they were engaged in non-tipped tasks unrelated to serving or bartending. This included cleaning toilets, or non-incidental tasks such as hours spent cleaning and maintaining drink dispensers.
The court wrote that by using servers and bartenders as “dishwashers, bussers, janitors and cooks, employers can allegedly eliminate or significantly reduce their need to hire full-time janitors and cooks, who – as non-tipped workers, are entitled to the full minimum hourly wage and therefore cost more to employ.”
As a result, the court found that the plaintiffs stated a claim under the Fair Labor Standards Act for minimum wage violations, reversed the lower court’s dismissal of the claims and remanded the matter for further proceedings.
What does this mean for restaurant owners?
Potential lawsuits as the decision may open the door to lawsuits by employees who are not paid the full hourly minimum wage for non-tipped work.
To protect yourself and your business, make sure to follow the tipped employment guidelines in your city or state carefully. Unclear how to do that? Then make sure you speak with knowledgeable business or employment law counsel. If you have questions, feel free to contact me, Julie Lusthaus at [email protected] and let’s talk.