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Seventh Circuit Rejects Dual Minimum Wage Requirement for Tipped Workers Who Perform Other Duties

    Client Alerts
  • August 01, 2016

The hospitality industry continues to face an increasing number of collective action lawsuits filed by tipped employees who claim that their employers failed to comply with minimum wage requirements for servers and related occupations. Last month, the Seventh Circuit Court of Appeals rejected a minimum wage claim filed by servers who alleged that they should be paid the full minimum wage for time spent on activities other than waiting on customers.

Schaefer v. Walker Bros. Enters., Inc. involved a claim by servers who alleged that they spent time during the workweek on tasks such as basic food and beverage preparation as well as light cleaning duties. They alleged that the special federal sub-minimum wage and tip credit for servers does not apply to this non-tipped work, and therefore the employer should pay the full applicable minimum wage for the portion of their work spent on these other tasks.

The Seventh Circuit affirmed dismissal of the claim on summary judgment. First, the court refused to distinguish between direct customer service and related tasks such as making coffee or chopping fruit. Department of Labor rules state that such ancillary work activities fall within the tip credit wage rate. The cleaning activities were a closer legal question, but the Seventh Circuit concluded that negligible time spent on these duties does not require establishment of a separate minimum wage rate. The court defined negligible as 20 percent or less of the employee’s working time.

This decision avoids a situation where hospitality industry employers would have to devise a dual wage system for tipped employees, and somehow figure out how to separately record time spent on different tasks at the different minimum wage rates. Employers have been regularly losing FLSA tip credit cases where employees did not receive the required customer gratuities. This decision at least does not add to such employers’ legal burdens.