Employee Wages: Employer’s Tip Sharing Plans Are Not Always Legal

Restaurants frequently use a tip pooling system. When the system results in employees not receiving at least the minimum wage, or when employees who do not interact with customers are part of the tip sharing system, employers may be violating state and/or federal law.

In Ford v. Lehigh Restaurant Group no. 15-0886 (C.P. Lackawanna April 24, 2015) (Nealon, J.), the employees filed a lawsuit over the employer’s requirement to share tips with other workers to satisfy minimum wage requirements. The court denied the employer’s attempt to dismiss the case. The employer owns 19 Red Robin casual-dining restaurants in the Lehigh Valley, Scranton and Wilkes-Barre, Harrisburg and Philadelphia areas. Restaurant servers who worked at Red Robin restaurants filed a lawsuit claiming the company’s policy violates the Pennsylvania Minimum Wage Act.
Under the Pennsylvania Minimum Wage Act law, an employee who “customarily and regularly receives tips,” is eligible to share tips. In Ford, the employer utilizes a provision of the law that allows it to pay servers $2.83 an hour and claim a tip credit to make up the difference of the $7.25 an hour minimum wage. The court held that the degree to which a restaurant worker interacts directly with customers is key to determining whether the employee is eligible to share tips. The Court found that the employer failed to show that kitchen workers, known as “expos,” who assist in food preparation and quality control, are definitely permitted to be included in a tip pool. While the employer argued that it does not matter whether the employees have regular interaction with customers to participate in the tip pool; and that the employees are definitely eligible to share tips with servers, the court relied on several federal court decisions that have determined customer interaction is relevant under the Fair Labor Standards Act, which includes similar language.

The court’s decision allows a proposed class action lawsuit to move forward in which the share of tips paid to 2,000 former server employees could exceed $5 million.

Abramson Employment Law represents employees who have claims for unpaid overtime, unpaid wages and wages improperly withheld by employees which are subject to the Fair Labor Standards Act (FLSA) and Pennsylvania law . For more information see http://www.job-discrimination.com/lawyer-attorney-1126494.html

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Filed under Employment Law, Fair Labor Standards Act, Pennsylvania Wage Payment and Collection Law, Unpaid Overtime FLSA, Unpaid Wages

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