In the recent case of Fast v. Applebees International, Inc., the United States Court of Appeals for the Eighth Circuit (which decides minimum wage and overtime cases in Missouri) ruled in favor of a group of servers and bartenders who sued Applebee's for failing to pay minimum wage. The suit was brought pursuant to the Fair Labor Standards Act ("FLSA"), which requires that employees receive at least minimum wage for all hours worked. The primary issue in the case was the extent to which an employer receives a credit towards the minimum wage for tips received by an employee (the so-called "tip credit").
The FLSA allows employers to pay a minimum cash wage of $2.13 per hour ($3.63 per hour in Missouri) to employees in a "tipped occupation" as long as the employee's tips made up the difference between the $2.13 hourly cash wage and the current federal minimum wage (presently $7.30/hour). Under the FLSA, a tipped employee is one who customarily and regularly receives more than $30+ per month in tips. In the Fast case, the dispute was whether the employees were engaged in a tipped occupation when only some of their duties result in tips (and some do not). Applebees argued that it is entitled to the tip credit for all of an employee's hours if the tips make up the difference between $2.13 per hour and the $7.25 per hour minium wage, regardless of how much time an employee spends performing tip-producing duties. The employees argued that they are entitled to full minimum wage rates (without applying any tip credit) for time spent performing non-tipped duties.
Prior to the Fast case, employers faced some uncertainty in applying the tip credit when workers perform a mixture of tipped duties and non-tipped duties. For example, a server may wait tables for tips part of the time, but may also perform many non-tipped duties, such as cleaning bathrooms, sweeping, cleaning and stocking service areas, rolling silverware, etc. Likewise, in addition to serving drinks, a bartender may perform such duties as wiping down bottles, cleaning blenders, cutting fruit for garnishes, taking inventory, cleaning up after closing, etc.
Regulations of the U.S. Department of Labor ("DOL") state that an employee is entitled to the full minimum wage rate while performing any tasks that do not generate tips. Further, the DOL's Field Handbook provides that if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work (such as preparation, cleaning, or maintenance work), then the employer is not allowed to utilize the tip credit for the amount of time the employee spends on those non-tipped duties. Previously, the Eighth Circuit had never decided whether the DOL's 20% rule must be followed by employers.
The Eighth Circuit Court of Appeals held that the DOL's interpretation of the tip credit, as contained in the DOL Handbook, was entitled to deference. The Court stated that if a tipped employee performs some incidental non-tipped tasks, the employer is entitled to apply the tip credit to all hours worked as long as the incidental duties make up 20% or less of the employee's work time. However, if the incidental, non-tipped duties exceed 20%, the employer loses the ability to apply the tip credit.
If you receive tips as part of your compensation, and you spend more than 20% of your time performing non-tipped duties, you are entitled at least the full minimum wage ($7.30/hour), and your employer may not apply the tip credit. If you believe your compensation arrangement violates the law, or if you want to better understand your rights, you should contact a St. Louis overtime lawyer.
