The hospitality industry continues to battle numerous lawsuits claiming that employers failed to properly compensate employees who earn a portion of their wages through tips. Earlier this month, the Tenth Circuit Court of Appeals ruled in favor of restaurant servers who claimed that their tips should not be taken into account when determining whether their employer paid minimum wage for other work that does not result in customer tips.
In Romero v. Top-Tier Colo. LLC, the plaintiff was paid a sub-minimum wage applicable to servers who receive tips. The employer can claim a tip credit that makes up the difference between the wages paid and the full federal minimum wage. In this case, the plaintiff alleged that servers performed non-tipped work tasks such as cleaning, food preparation and restocking. She sued for the difference between the sub-minimum wage paid by the employer and the full federal minimum during this non-tipped working time. The district court dismissed the suit because with her tip income included, the plaintiff received the full federal minimum wage for all hours worked.
The Tenth Circuit disagreed, remanding the case for further proceedings. The court concluded that employers can only claim the tip credit for work that generates customer tips. If the tipped employee is engaged in substantial non-tipped work, the employer must pay the full federal minimum wage for these hours, even if the server’s tips would result in her making more than this minimum for all hours worked. The employer receives no tip credit for non-tipped work.
This decision does not mean that the restaurant automatically owes the wage difference. Other courts have held that non-tipped work that is incidental to servers’ direct customer service does not constitute a separate class of hours worked. Unless the incidental cleaning and preparation activities become a substantial part of the servers’ work days, employers do not have to maintain separate records of tipped and non-tipped work.