Minimum wage law and side work: Tips for restaurant owners
If your restaurant has tipped employees, make sure you compensate them properly for the non-tipped work they perform. Otherwise, you might end up in a lawsuit similar to the one filed against the Hickory Tavern restaurant chain.
As reported by the Charlotte Observer, former server Vanessa Chavez claims that the restaurant forced her to spend as much of 40% of her shifts performing side work, but refused to pay her the minimum wage of $7.25 for those hours.
Let's find out what you can learn from this restaurant's ordeal.
How minimum wage law applies to restaurant side work
The federal minimum wage is $7.25. According to the U.S. Department of Labor, under the Fair Labor Standards Act, employers are allowed to claim a maximum hourly tip credit of $5.12 and pay tipped workers (employees who earn at least $30 a month through tips) a minimum of $2.13 an hour. This is based on the assumption that workers will earn the additional $5.12 through tips to meet the minimum wage.
However, that changes if a tipped worker is asked to perform too many duties outside the scope of their normal employment. A server's job typically consists of taking orders, delivering food, and clearing tables – work for which they also receive tips from customers. But if an employer demands that tipped workers spend more than 20% of their work week performing non-tipped side work (washing dishes, making coffee, filling ketchup bottles), the U.S. Department of Labor prohibits employers from taking the tip credit.
This means employers are required to pay tipped workers minimum wage for hours spent performing non-tipped work. If they don't, they're breaking the law.
Several restaurant chains have experienced lawsuits like the one Hickory Tavern faces. For example…
- 5,500 employees sued Applebee's over FLSA violations regarding non-tipped work.
- A similar lawsuit was filed against the restaurant chain Joe's Crab Shack.
- Ruby Tuesday was sued over these violations earlier this year, too.
How small restaurants can avoid wage lawsuits
If you are a restaurant owner, it's important to:
- Track the percentage of non-tipped work your tipped employees perform.
- Adjust their pay as needed.
For example, say your server typically works 25 hours a week. If they spend at least five hours per week on non-tipped tasks, you are required to pay them the full federal minimum wage of $7.25 per hour for that time. If you don't, you could be sued.
Pro tip: There are 29 states with a minimum wage higher than the federal minimum, so make sure you meet the wage requirements for your state. For reference, the National Conference of State Legislatures has a list of minimum wage requirements by state.
Lastly, if you're accused of violating minimum wage laws, your small business insurance probably won't cover the cost of the lawsuit. That's because not paying employees the wages they're owed is a federal crime, and insurance doesn't usually cover illegal actions.
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