May 21 is National Waiters and Waitresses Day. The origin of the holiday is unclear, but it recognizes the value and importance of a good waiter or waitress, and encourages restaurant patrons to reward their food servers with good tips. Employers need to remember that under federal law, generally those tips belong to the food servers – not the employer.
Misunderstanding this rule recently became a hot reality television topic after Gordon Ramsay’s “Kitchen Nightmares” show ended early, when Ramsay felt he was unable to help the husband-wife team of Amy’s Baking Company in Scottsdale, Ariz. One of the problems that Ramsay uncovered while trying to help the ailing restaurant was that the owners required their waiters and waitresses to turn over their tips.
Although the restaurant owners have claimed that they pay their workers between $8 and $14 per hour, their behavior nevertheless could be in violation of the Fair Labor Standards Act if their waiters and waitresses qualify as “tipped employees” under the act.
Tips are the employee’s property, no matter how much the employer pays
According to Fact Sheet #15 from the U.S. Department of Labor: “Tips are the property of the employee. The employer is prohibited from using an employee’s tips for any reason other than as a credit against its minimum wage obligation to the employee (“tip credit”) or in furtherance of a valid tip pool.”
In other words, employers are prohibited from retaining their employees’ tips. Under the “tip credit” provision, employers of these workers may apply a portion of their tips — a tip credit — toward the minimum wages they’re owed, as long as certain requirements are met.
For more on DOL’s interpretation of the FLSA’s tip requirements, click here.