Common Wage and Overtime Issues for Tipped Employees
U.S. and Ohio labor laws define anyone who takes more than $30 per month in tips as a tipped employee. The group includes restaurant and bar workers, and may include other employees such as child and elder care providers, and individuals who provide personal services such as drivers and landscapers. Earning tips can significantly increase a worker’s take-home pay.
Unfortunately, many employers take advantage of paying tipped employees less than the full minimum wage without complying with federal and state laws. Some employers also enforce tip-pooling rules that compel workers to give up percentages of the money they earned from appreciative customers and clients.
There are four very common wage and overtime issues experienced by tipped employees.
Problem 1: Employers Take a Tip Credit Without Providing Required Tip Credit Notice Disclosures
An employer greatly benefits from paying its tipped employees less than the full minimum wage for all hours they work. Although there are still minimum wages required for tipped worked ($2.13 under federal law and $4.15 under Ohio law in 2018), employers obviously save significant labor costs by not having to pay these employees the full minimum wage.
Before an employer can enjoy the benefit of not paying tipped employees the full minimum wage (assuming they pay $4.15 per hour, then over $8,000 per year savings per full-time tipped employee), they must make certain tip credit notice disclosures.
These disclosures include:
(1) the amount of cash wage paid to the employee;
(2) the amount of the tip credit;
(3) that the tip credit claimed cannot exceed the tips received;
(4) that all tips are to be retained by the employee unless there is a valid tip pooling arrangement limited to tipped employees;
(5) that an employer cannot apply the tip credit unless the tipped employee has been informed of the provisions.
Many employers fail to make the tip credit notice disclosures and this may result in substantial benefits to the tipped employees if they take legal action against their employer. Contact an attorney who represents tipped employees to discuss your rights further.
Problem 2: Tipped Employees Do Not Receive At Least The Full Minimum Wage
Employers are allowed to pay tipped employees a reduced hourly wage as long as the money those employees receive in tips make up the difference between the lower wage and the full wage. In Ohio during 2018, this means that a tipped employee could be paid $4.15/hour in wages only if he or she brought in enough tips to actually earn at least $8.30/hour for an entire shift between their cash (hourly) wage and tips earned, or at least $66.40 for eight hours.
When a tipped employee in Columbus works a slow shift and does not end up making the Ohio minimum wage, their employer must make up the difference. It is illegal for an employer to offer a worker only the tipped minimum wage or to tell a worker that they are only entitled to earn the tipped minimum wage.
Some employers will go so far as to tell tipped employees that they do not have a right to receive an hourly wage at all.
Problem 3: Tipped Employees Receive No or Miscalculated Overtime Pay
Tipped employees who work more than 40 hours during a seven-day workweek qualify to receive overtime pay. Calculations of overtime pay for tipped employees can be very complicated. Overtime for a tipped employee is a legal quagmire for employers. Tipped employees should discuss their overtime pay with an overtime lawyer.
Problem 4: Mandatory Tip Pooling Leaves Tipped Employees Earning Less Than Full Minimum Wage
Under certain circumstances, employers are allowed to require tipped employees to contribute a percentage of the tips they receive each shift to other tipped employees. This requirement becomes illegal when contributing the mandated percentage leaves a tipped employee earning less than the full minimum wage of tipped minimum plus tips for an entire shift. The calculation must be performed for each tipped employee after each shift. When it is not, or when an employer ignores the results and demands the regular percentage of tips, wage theft is occurring.
If any of these situations sound like something you and your co-workers are going through, please call 614-949-1181 or contact me through this website to schedule a free and confidential consultation.