Tuesday, September 20, 2022

Employers, repeat after me: “Tips belong to employees, not employers.”

$1,351,253.34. That's the amount a federal judge has ordered the Empire Diner, its owner, Ihsan Gunaydin, and its manager Engin Gunaydin to pay a group of 107 servers and kitchen workers based on an illegal tip scheme.

What rendered the restaurant's tip scheme illegal? It required servers to turn over 10 to 15 percent of their total tips received on any given shift to pay the bussers' wages. That's a clear violation of the Fair Labor Standards Act.

Specifically, section 3(m)(2)(B) of the FLSA provides: "An employer may not keep tips received by its employees for any purposes, including allowing managers or supervisors to keep any portion of employees' tips, regardless of whether or not the employer takes a tip credit." This would include redistributing them to other employees to pay any portion of non-tipped wages.

There are limited situations in which an employer may hold on to an employee's tips:
  • Administratively to distribute them to the employee who received them;
  • To facilitate a lawful tip pool; or 
  • When a manager or supervisor receives tips directly from customers based on services that he or she directly and solely provides.
In the words of DOL Principal Deputy Wage and Hour Administrator Jessica Looman, "Tipped workers in the food services industry rely on their hard-earned tips to make ends meet. By diverting a portion of these tips, restaurant employers violate federal labor laws and harm workers and their families. This significant and successful litigation demonstrates the Department of Labor's commitment to protect the nation’s essential workers."

Or to state it more directly, tips belong to employees, period; don't steal them.