In our June 28, 2018 post on District of Columbia voters approving Initiative 77, which would incrementally increase the minimum cash wage for tipped workers to $15.00 per hour by July 1, 2025, and effectively eliminate the tip credit staring July 1, 2026, we noted the possibility of action by the D.C. Council to amend or overturn it. Consistent with the opposition to the initiative previously expressed by a majority of the Council, on July 9, 2018, a seven-member majority of the Council introduced a bill (Tipped Wage Workers Fairness Amendment Act of 2018) to repeal Initiative 77. As the Council is now on a two-month summer recess, no further formal action will occur until the fall. …
Featured on Employment Law This Week: Under the recently signed Consolidated Appropriations Act, Congress has amended the FLSA to address tip pools. The amendment prohibits employers from keeping employees’ tips or distributing any portion of the tips to managers or supervisors. Non-tipped, back-of-the-house employees, like cooks and dishwashers, may participate in tip pools when the employer pays at least the minimum wage and does not take a tip credit. The amendment also provides for enhanced damages and penalties when employees are deprived of tips.
Watch the segment below:
Following is an excerpt:
Depending on the jurisdictions within which they operate, certain employers and their counsel will soon see a significant change in early mandatory discovery requirements in individual wage-hour cases brought under the Fair Labor Standards Act (“FLSA”).
A new set of initial discovery protocols recently published by the Federal Judicial Center (“FJC”), entitled Initial Discovery Protocols For Fair Labor Standards Act Cases Not Pleaded As Collective Actions (“FLSA Protocols”), available here, expands a party’s initial disclosure requirements to include additional documents and information relevant to FLSA cases. These Protocols apply, however, only to FLSA lawsuits that have been filed in participating courts that have implemented the Protocols by local rule or by standing, general, or individual case order. …
In the new issue of Take 5, our colleagues examine important and evolving issues confronting owners, operators, and employers in the hospitality industry:
- Avoiding “Perfectly Clear” Successor Status When Acquiring a Property with a Union Workforce Now Requires Greater Vigilance
- Restaurant Manager Misclassification Complaints Highlight Important Defense Strategies for Hospitality Owner/Operators
- Buyer Beware: Purchasing Assets from a Unionized Employer May Come with a Nasty Withdrawal Liability Surprise
A featured story on Employment Law This Week is the Ninth Circuit’s backing of the Department of Labor’s rule on “tip pooling.”
In 2011, the Department of Labor issued a rule that barred restaurant and hospitality employers from including kitchen staff in “tip pools,” which are sometimes used to meet an employer’s minimum wage requirements. The DOL ruled that kitchen staff should be excluded from pools even if the tips are not required to meet minimum wage obligations. Two district court decisions held that the department does not have the authority to regulate this practice outside of the minimum wage issue, but the Ninth Circuit recently reversed those decisions and upheld the department’s rule.
View the episode below or read more about this case in an earlier post on this blog.
The Fair Labor Standards Act (“FLSA”) permits employers to use “tip credits” to satisfy minimum wage obligations to tipped employees. Some employers use those “tip credits” to satisfy the minimum wage obligations; some do not. (And in some states, like California, they cannot do so without running afoul of state minimum wage laws.)
Many hospitality employers use “tip pools” to divide customer tips among staff. Those “tip pools” normally provide for tips to be divided among “front of the house” employees who are involved in serving customers – servers, bartenders, etc. Some employers have extended the “tip pools” to include “back of the house” employees – dishwashers, cooks, etc. – particularly where they are not using a “tip credit.”
In 2011, the Department of Labor (“DOL”) issued a rule prohibiting employers from including kitchen staff in “tip pools” – even where no “tip credit” was being taken. Two separate district courts held that the DOL did not have authority to issue such a rule where no “tip credit” was taken, relying on the Ninth Circuit’s ruling in Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).
On February 23, 2016, in Oregon Restaurant & Lodging Assoc. v. Perez, No. 13-25765 (9th Cir. Feb. 23, 2016), a divided Ninth Circuit Court of Appeals reversed those two district court decisions, holding that the DOL in fact has the authority to regulate the “tip pooling” practices of employers even when they do not take tip credits — including prohibiting employers from including kitchen employees in “tip pools.” While confirming that the FLSA permits the use of “tip credits” to fulfill minimum wage requirements, the Court concluded that the DOL was acting within its authority in concluding that employers that establish “tip pools” may only do so when the persons who are included are persons who normally receive tips – and that, as kitchen staff do not normally receive tips, they cannot be included in “tip pools.”
The decision not only appears to be inconsistent with the Ninth Circuit’s own Cumbie decision, but with other courts that have reviewed this same issue.
The National Restaurant Association, a co-plaintiff in the case, has already indicated that it may seek review of the decision by a full panel of the Ninth Circuit. And it is certainly possible that the decision will be reviewed by the United States Supreme Court. But unless and until the decision is reversed, restaurant employers in the Ninth Circuit – which encompasses Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington –would be wise to review their “tip pooling” practices promptly with counsel.
We’d like to share some news with hospitality employers: Epstein Becker Green has released a new version of its Wage & Hour Guide for Employers app, available without charge for Apple, Android, and BlackBerry devices.
Following is from our colleague Michael Kun, co-creator of the app and leader of our Wage and Hour group:
We have just updated the app, and the update is a significant one.
While the app originally included summaries of federal wage-hour laws and those for several states and the District of Columbia, the app now includes wage-hour summaries for all 50 states, as well as D.C. and Puerto Rico.
Now, more than ever, we can say that the app truly makes nationwide wage-hour information available in seconds. At a time when wage-hour litigation and agency investigations are at an all-time high, we believe the app offers an invaluable resource for employers, human resources personnel, and in-house counsel.
Key features of the updated app include:
- New summaries of wage and hour laws and regulations are included, including 53 jurisdictions (federal, all 50 states, the District of Columbia, and Puerto Rico)
- Available without charge for iPhone, iPad, Android, and BlackBerry devices
- Direct feeds of EBG’s Wage & Hour Defense Blog and @ebglaw on Twitter
- Easy sharing of content via email and social media
- Rich media library of publications from EBG’s Wage and Hour practice
- Expanded directory of EBG’s Wage and Hour attorneys
Our colleague Jeffrey Ruzal at Epstein Becker Green recently wrote a Take 5 newsletter focused on the hospitality industry: “Tip-Related Claims Will Continue to Be Served Up as the Lawsuit du Jour Against the Hospitality Industry in 2015.”
Following is an excerpt:
The hospitality industry is particularly fertile ground for a wide variety of wage and hour issues, which continue to plague management through steadily increasing federal and state department of labor investigations and enforcement actions and the seemingly endless onslaught of private wage and hour lawsuits filed by an overzealous plaintiffs’ bar. Tip credit claims are government regulators’ and plaintiffs’ favorite, and there are no signs that such claims will abate in the coming year.
Employers may take a credit against the prevailing minimum hourly wage earned by employees performing tip-earning duties, such as servers, bartenders, bussers, hosts, housekeeping personnel, and bell staff. Before taking a tip credit, however, employers must comply with very specific federal and state tip credit laws, rules, and regulations, which form the basis of the various tip credit lawsuits commonly filed against employers in the hospitality industry.
Because of the prevalence of tip credit lawsuits in the hospitality industry, this edition of Take 5 will address five of the most common tip-related wage and hour issues that are often the focus of litigation. They are as follows:
- Properly Providing Tip Credit Notice
- Correctly Applying the Tip Credit Allowance
- Properly Computing Tipped Employees’ Overtime Pay
- Ensuring That Tipped Employees Actually Perform Tipped Work
- Complying with Tip Pooling or Sharing Requirements
Read the full Take 5 here.
Kara Maciel, a Member of the Firm in the Labor and Employment, Litigation, and Health Care and Life Sciences practices, in the Washington, DC, office, was quoted in an article titled “For Fine Dining Sector, Tip Pools Can Be Legal Trap.” (Read the full version – subscription required.)
Following is an excerpt:
As a wave of lawsuits hits restaurants over tip pool violations, fine dining establishments packed with sommeliers, mixologists and other high-end specialists that tend to take on some managerial duties face the greatest risks of becoming targets for litigation or Department of Labor audits, attorneys say. …
“It’s always an open question whether someone like a maitre d’ or sommelier or expediter should be included in the tip pool,” said Kara M. Maciel, a labor and employment litigator with Epstein Becker & Green PC.
And the stakes for being wrong on this can be high, since if a tip pool is found to violate federal or state laws, it could invalidate the tip credit that the restaurant took or was banking on for that period of time, Maciel says. …
The same goes with catering hall banquet captains, who might be tasked with taking care of brides and grooms on their big days but who also often supervise staff, according to Maciel.
Our colleague Kara Maciel, the editor of Hospitality Labor and Employment Law Blog, was quoted in an article titled "Six Tips on Not Getting Tripped Up by FLSA’s Tipped Employee Rules" that was recently published in Thompson’s HR Compliance Expert.
Following is an excerpt:
Employers need to make sure they are following both federal Fair Labor Standards Act requirements and state laws regarding tipped employees, said Kara Maciel of the firm Epstein Becker Green during a recent seminar focused on tipped employees. …
However, every state has its own set of rules regarding tipped workers and employers must make sure they also are compliant with those local requirements. States such as Hawaii, Massachusetts and New York are particularly challenging and in some cases have seen increased litigation over tip practices in recent years, Maciel noted. …
Click here to read more.