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How tips are treated under the Fair Labor Standards Act

| Jul 31, 2017 | Employee Rights |

When workers in New Jersey and around the country are paid less than the established federal minimum wage or denied overtime pay despite working for more than 40 hours during a workweek, they may seek redress under the Fair Labor Standards Act. While these claims may be supported by documentation such as time sheets and pay stubs when employees are paid a fixed rate, matters can become contentious when workers earn some of their income in the form of tips.

Restaurant employees sometimes perform two or more tasks. When some of their duties generate tips and others do not, employers are required to pay them at least the federal minimum wage for all non-tipped work. However, the 1938 law makes an exception for what is known as side work. This exception allows employers to claim a tip credit for tip-related work such as clearing tables and setting up workstations, but the FLSA side work rule is subject to two important limitations.

The first limitation states that workers must be paid at least minimum wage for any duties that are not related to tipped work. Examples of non-incidental work include vacuuming restaurant carpets and clearing snow from parking lots. Workers must also be paid minimum wage when the side duties they perform account for 20 percent or more of their hours worked. While this restriction only appears in a Department of Labor handbook and not the FLSA, it has been recognized by the 7th and 8th Circuits.

Attorneys with experience in employee rights cases may pay close attention to how the courts interpret state or federal wage and hours laws, and they could urge workers who feel that they have been treated unfairly to keep accurate records of the hours they worked and the compensation they received. Employers will sometimes settle these types of matters in order to avoid negative publicity and possibly severe sanctions.