Tipped Employees Lose in Wage Claim Against Oregon Restaurants

Tipped Employees Lose in Wage Claim Against Oregon Restaurants

PORTLAND — A federal court in Oregon granted summary judgment in favor of two restaurants that were sued by employees for violations of the Fair Labor Standards Act (FLSA). The employees claimed that the restaurants violated FLSA by requiring them to share tips with other employees who do not normally receive tips from customers. The court found that the restaurant did not violate FLSA in sharing tips with managers and kitchen staff.

Restrictions on Tip-Pooling

The suit alleges that the restaurants violated FLSA when it required the plaintiffs to participate in a tip pool that was not compliant with the law. According to the plaintiffs, the tip pool was invalid under FLSA because it permitted employees not customarily tipped and managers to share in the tip pool. In response, the restaurants argued that they did not violate FLSA in creating the tip pool because the law only restricts employers who take a tip credit, and since the plaintiffs were paid an hourly wage in excess of the federal minimum wage, they did not take a tip credit and did not violate FLSA.

According to regulations issued by the Wage and Hour Division of the U.S. Department of Labor, employers are prohibited from using an employee’s tips for any other reason than as a credit against its obligation to pay that employee the federal minimum wage or in furtherance of a valid tip pool. Tip pools may only be created among employees who customarily and regularly receive tips, such as waiters, waitresses, bussers, etc. The maximum tip credit that an employer can currently claim under FLSA is $5.12 per hour.

Tip-Pooling when Employers Take No Tip Credit

The court in this case agreed with the restaurants and adopted an earlier decision by a federal court of appeals. When an employer pays an hourly wage that exceeds the federal minimum and, therefore, does not take a tip credit, the tip-pooling arrangement is not subject to FLSA. Here, it is undisputed that the tip pool in question included non-tipped employees and managers, which would make it invalid only if the employer took a tip credit to satisfy its minimum wage obligations. Since the restaurants here did not take a tip credit, the restrictions do not apply.

The court here acknowledged that the DOL regulations do not differentiate between employers who take a tip credit and those who do not in imposing tip-pooling restrictions. However, the court adopted the position taken by a federal court of appeals that the DOL regulation in question is invalid. According to that decision, Congress only intended to impose conditions on employers that take a tip credit but did not intend to impose a requirements regarding all tipped employees.

FLSA contains a body of complex provisions, and if you have a wage claim under FLSA, you should seek the help of a seasoned attorney to help you navigate the various procedural and legal requirements. If you believe your employer unlawfully deprived you of minimum wage and overtime, you should call (855) 754-2795 or complete the Free Unpaid Overtime Case Review form on the top right of this page. Our top-rated team of wage lawyers will evaluate your situation to determine the best option. We will also determine you should file a lawsuit against your employer. Call our experienced attorneys today.

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