Wage & Hour Counsel : Wage & Hour Lawyer & Attorney : Littler Mendelson Law Firm : Employment Law, Labor Relations

By Sarah Green

In the latest decision concerning service charges and tips in the hospitality industry, the Maine Supreme Court recently addressed whether banquet wait staff may share a “service charge” paid by customers with other employees under Maine law without violating Maine’s tip credit statute. In Hayden-Tidd v. The Cliff House & Motels, Inc., the plaintiff, a former banquet server, appealed summary judgment dismissing her putative class action, which alleged that the employer violated Maine law by not paying her and her fellow servers the entire mandatory “service charge” assessed to customers when the employer instead shared the service charge among other banquet employees. The Maine Supreme Court held that the employer’s practice did not violate Maine law.

Specifically, Maine law in effect during the plaintiff’s employment provided that an employer could pay only half of the minimum wage to its employees who received tips sufficient to raise their wages at or above the statutory minimum ($7.50 per hour during the relevant period). In order to ensure that employees received the entire tip left by the customer, the tip credit statute further required that “[t]ips that [were] automatically included in the customer’s bill or that [were] charged to a credit card must be given to the service employee.”
 

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According to a recently-released Field Assistance Bulletin, the Department of Labor’s Wage and Hour Division (WHD) has advised its staff to uniformly enforce a rule that became effective on May 5, 2011 governing ownership of employee tips under the Fair Labor Standards Act (FLSA). In many states employers are permitted to take a “tip credit,” or pay employees less than the minimum wage so long as the employees receive sufficient tip income to make up the difference. The new WHD tip rule stipulates, among other things, that tips are the property of the employee regardless of whether the employer has taken a tip credit under section 3(m) of the FLSA, and that an employer is prohibited from using an employee’s tips for any reason other than as a tip credit or in furtherance of a legitimate tip pool. The bulletin sent to WHD regional administrators and district directors emphasizes that this rule will be enforced in all states, even the nine states under the jurisdiction of the Ninth Circuit. To learn more about the bulletin and its potential implications for employers, please continue reading at Littler's Washington D.C. Employment Law Update.

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By Chris Kaczmarek

In a case of first impression, a Massachusetts Superior Court judge recently held that an employer may adopt a policy prohibiting employees from accepting tips from customers without violating the Massachusetts Tips Law. Any such policy, however, must clearly and conspicuously be announced to customers, such that a reasonable customer would understand that any money left by the customer would not be given to employees as a tip.

In Meshna v. Scrivanos, a number of employees who worked at Dunkin’ Donuts franchises sued the owner/operator of those franchises, claiming that the stores’ no-tips policy violated Massachusetts law. The policy required employees to return tips to customers. According to the complaint, if the employee was unable to return a tip to a customer, then the employee was required to put the tip in the register to be retained by management.

The defendant moved for judgment on the pleadings, arguing that Massachusetts law permits employers to have a no-tipping policy. The court agreed with the defendant’s argument in principle, holding that the Massachusetts Tips Law does not prohibit “a no-tipping policy that is clearly and conspicuously announced” to customers such that a reasonable customer would understand that any money left by the customer would not be given to employees as a tip.

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As previously discussed, Colorado proposed increasing its minimum wage rate for 2012. On December 9, 2011, after holding hearings and soliciting comments on the proposed increase, the Colorado Department of Labor & Employment announced the minimum wage rate employees must be paid, effective January 1, 2012: the minimum wage increases 28 cents per hour, from $7.36 to $7.64 per hour; the rate paid to tipped employees also increases 28 cents per hour, from $4.34 to $4.62 per hour.

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The Vermont Department of Labor has announced the state’s 2012 minimum wage rates. Effective January 1, 2012, an employee must be paid at least $8.46 per hour, a 31-cent increase from 2011. Additionally, tipped employees must be paid at least $4.10 per hour, a 15-cent increase from 2011. The maximum tip credit an employer may take increases 16 cents per hour to $4.36 per hour. For a list of 2012 minimum wage rates in other states, please see our previous post.

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By Niza Motola

On June 1, 2011, Florida’s minimum wage will increase to $7.31 per hour, a six cent increase from the previous $7.25 calculation effective on January 1, 2011. Employees who receive tips as compensation will see their minimum wage increase to $4.29 per hour, a six cent increase from $4.23. This unexpected increase is the result of a Florida court decision holding that the Florida Agency for Workforce Innovation violated Florida’s Constitution by failing to raise the Florida minimum wage on January 1, 2011. 

In Cadet v. Florida Agency for Workforce Innovation, filed in January 2011, the court agreed with the plaintiffs (including Restaurant Opportunities Center of Miami and Farmworker Association of Florida) that the Florida agency had incorrectly calculated the Florida minimum wage. Specifically, the plaintiffs had argued that in calculating the Florida minimum wage, the state agency improperly decreased the rate based on a decrease in the cost of living. As a result of a decrease in the cost of living from 2008 to 2009, the agency determined that for 2010, the state minimum wage rate should be decreased from $7.21 to $7.06. The agency then used the reduced 2010 state minimum wage rate of $7.06 to calculate an adjusted minimum wage rate for 2011 using the 1.4 percent increase in the cost of living from 2009 to 2010, resulting in a rate of $7.16, less than the federal minimum wage. The court held that under the Florida Constitution, the minimum wage cannot be decreased, resulting in a new calculation and the six cent increase, effective June 1, 2011.

On May 3, 2011, following the court ruling, the agency updated its web page on Florida’s minimum wage to reflect the increase to $7.31. This update may signal that the agency will not appeal the court’s ruling.

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The Seventh Circuit recently reversed the denial of class action certification in a Fair Labor Standards Act (FLSA) collective action, rejecting the notion that FLSA collective actions and state-law class actions are incompatible when filed in the same lawsuit. Ervin v. OS Rest. Servs., No. 09-3029, 2011 U.S. App. LEXIS 863 (7th Cir. Jan. 18, 2011).

In Ervin, the plaintiffs, former and current employees of a popular restaurant, sued the restaurant on behalf of themselves and all others who had previously worked or were currently employed at the restaurant as hourly or tipped employees, claiming that the restaurant’s tipping policy violated both the FLSA and two state wage & hour laws – the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act.

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The long-awaited revisions to New York's hospitality industry wage regulations have finally become official. They go into effect January 1, 2011, but full compliance is not required until March 1, 2011. Here are some highlights:

Minimum and Overtime Wage: The tip credit rate for food service workers is increased from $4.65 to $5.00 per hour. The new overtime rate for tipped food service workers will be $8.63. All nonexempt employees who work in the hospitality industry, including office workers employed by a hotel or restaurant, must be paid by the hour: shift pay, weekly salary or other non-hourly rate bases will no longer be permitted.

Spread of Hours: All nonexempt employees are eligible for spread of hours pay (i.e., an additional hour of pay at the minimum wage) if the time between the beginning and end of their workday exceeds ten hours.

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On August 8, 2010, in Lu v. Hawaiian Gardens Casino (pdf), the California Supreme Court held that employees do not have a private right of action under Labor Code § 351 to pursue remedies for misappropriated tips. The decision does not, however, address whether or not a cause of action for unfair competition may be predicated on Labor Code § 351, leaving employers exposed to unfair competition law (UCL) claims for providing tips to “agents” of the employer.

While the decision finally puts to rest the issue of whether the Legislature created a private cause of action under Labor Code § 351, employers should still carefully review their tip pooling policies. As a practical matter, this decision does not prevent employees from filing suit alleging a UCL cause of action based on Labor Code § 351. For a detailed discussion of this decision, please see Littler ASAP, “California Supreme Court Rejects Employees Right to Sue for Misappropriated Tips But Unfair Competition Law Cause of Action Remains" by Matthew Marca and Guissu Raffat.

This entry was written by Matthew Marca.

Photo credit: Thomas_EyeDesign

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The Nevada Labor Commissioner announced that, effective July 1, 2010, Nevada’s minimum wage increased as follows:

• Employers not offering qualifying health insurance benefits must pay employees a minimum wage rate of $8.25 per hour (up from $7.55 per hour).
• Employers offering qualifying health insurance benefits must pay employees a minimum wage rate of at least $7.25 per hour (increased from $6.55 per hour).

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On September 9, 2009, the California Supreme Court declined to review an appellate court order reversing an $86 million trial award against Starbucks. As discussed in detail in our earlier blog entry, in Jou Chau v. Starbucks Corporation, the court of appeal reversed the trial court's award to a certified class of Starbucks "baristas" who had challenged Starbucks’ tip policy on the ground that certain service employees, known as “shift supervisors,” had improperly shared in the customer tips left in a collective tip box. Since a denial of review by the California Supreme Court is done without comment, it is hard to predict what this means for other tip pooling cases. However, it is important to remember that the appellate court made a clear distinction between a collective tip box and service companies that pool tips. According to the appellate court, the Starbucks policy passed muster because (1) “shift supervisors” were part of the “team” of employees who provided service to the customers (along with baristas) and (2) a collective tip box was used.

 This blog entry was authored by Matthew Marca.

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