A Reminder on the Increase in the Minimum Wage and Best Practices on Taking Tip Credits
The Florida Constitution requires employers to pay employees wages no less than the minimum wage for all hours worked. As we initially reported in our October 2016 Employment Law Newsletter, beginning on January 1, 2017, Florida’s minimum wage increased to $8.10, up from $8.05 in 2016. Under Florida law, the minimum wage is recalculated by the Florida Department of Economic Opportunity on September 30th of each year, based on the Federal Consumer Price Index for the past 12 month period.
If an employer meets the eligibility requirements of the tip credit under the Fair Labor Standards Act (“FLSA”), an employer may count a tipped employee’s tips as wages received under the FLSA and Florida law. However, tipped employees must also be paid a direct wage. Florida’s new minimum (direct) wage for tipped employees in 2017 is $5.08 per hour, plus tips.
For the purposes of the tip credit analysis, tipped employees are employees who customarily and regularly receive more than $30.00 per month in tips. The Department of Labor (“DOL”) takes the position that employers are prevented from using an employee’s tips for any reason other than as a credit against the employer’s minimum wage obligation to the employee or for a valid tip pool. Employers electing to use the tip credit must be able to show that tipped employees receive at least the minimum wage when direct wages and the tip credit are combined. If an employee’s tips combined with the employee’s direct wages of at least $5.08 per hour do not equal the minimum wage of $8.10 per hour, the employer must make up the difference. Employers should note that if they intend to take the tip credit, they must provide specific, prior notice of the tip credit to employees.
In recent years, employers have come under scrutiny for taking the tip credit for time during which tipped employees perform “sidework.” The DOL takes the position that if a tipped employee spends more than 20% of his or her time performing non-tipped work, the employer may not take the tip credit during that time period, meaning that an employer should pay an employee his or her full minimum wage while preforming this work. There is no explicit regulation or statutory provision on the DOL’s “20% rule.” Instead, the rule appears in DOL Fact Sheet No. 15 which says that, “Where a tipped employee spends a substantial amount of time (in excess of 20 percent in the work week) performing related duties, no tip credit may be taken for the time spent in such duties.” The rule is also discussed in the DOL’s Field Operating Handbook. There has been an increase in litigation in this area. To reduce the likelihood of such a lawsuit, employers should be careful in considering how they distribute and assign work that is “related to” but not tipped work, and it is safest to ensure that any non-tipped work does not exceed 20% of a tipped employee’s work time.
Employers should seek the advice of counsel to ensure they meet the pay, disclosure and recordkeeping obligations of the FLSA and Florida law. A member of the Employment Law Group at Trenam Law would be happy to help you.