Matters Management

$912,594

A federal investigation has recovered $912,594 for 44 employees of a Londonderry brewery and restaurant that illegally kept workers’ credit card tips and incorrectly exempted several salaried employees, such as brewers, bartenders, cooks and administrative staff from overtime pay requirements.

“The U.S. Department of Labor found Pipe Dream Brewing violated federal law that forbids managers, supervisors and employers from participating in tip pools or pocketing any portion of employees’ tips for any purpose,” explained Wage and Hour Division District Director Steven McKinney in Manchester, New Hampshire. “As the case’s outcome shows, denying employees their full legal wages and keeping employees’ tips can have costly consequences for employers.”

$125,819

Investigation findings: U.S. Department of Labor Wage and Hour Division investigators found the Lexington pub and restaurant distributed earned tips with traditionally non-tipped employees, such as dishwashers and cooks and, by doing so, operated an invalid tip pool. The division learned that the employer used earned tips to cover most of the servers’ gross pay and failed to pay a cash wage of at least $2.13 per hour directly to tipped employees as required. These actions violated the Fair Labor Standards Act, as did the employer’s failure to keep accurate record of tips earned and hours worked by employees.

“Pay practices a business chooses to use must meet legal requirements. In this case, we found that — while allowing some employees to take home more than federal minimum wage — Krafty Draft Brew Pub ignored its obligation to pay their share of its workers’ income and passed that responsibility to its customers,” explained Wage and Hour Division District Director Jamie Benefiel in Columbia, South Carolina. “Employers unsure of their legal obligations should contact their local Wage and Hour Division office for assistance. That’s the best way to ensure that they pay employees all of their rightful wages.”

Under the FLSA, a tipped employee is an employee engaged in an occupation in which they customarily and regularly receive more than $30 a month in tips. This Fact Sheet provides general information concerning the application of the FLSA to tipped employees, whether an employer pays the full minimum wage or takes a credit against the tips earned by the employee towards its minimum wage obligations.

Employers must provide the following information to tipped employees before taking a tip credit under the FLSA

• the amount of the direct (or cash) wage the employer is paying a tipped employee, which must be at least $2.13 per hour;

• the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required direct (or cash) wage of $2.13 and the current minimum wage of $7.25);

• that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;

• that all tips received by the tipped employee are to be retained by the employee except for a valid tip pooling arrangement limited to employees who customarily and regularly receive tips; and

• that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.