Recently, a federal court upheld the Department of Labor’s tip credit notice regulation. This regulation requires that employers provide notice to “tipped employees” of the federal Fair Labor Standards Act tip credit provisions.
The Fair Labor Standards Act (FLSA) is one of the oldest federal employment laws. This Depression-era law sets forth certain minimum wage and overtime standards applicable to virtually all U.S. employers. The FLSA is one of the most employee-friendly of the federal labor laws.
One of the rules the FLSA sets forth is the tip provision. The tip provision provides that an employer is allowed to pay tipped employees $2.13, rather than the current minimum wage ($7.25 in most states), and use an employee’s tips as a credit toward the rest of the minimum wage. However, an employer may only use a tip credit if it informed its employees that it is going to do so.
In National Restaurant Association v. Solis, a D.C. court evaluated just what steps an employer must take to adequately “inform” its employees. In 2011, the Department of Labor announced employers must inform employees:
• of the amount of the cash wage to be paid to the employee;
• of the additional amount by which the wages of the employee are increased by the tip credit (the value of which may not exceed actual tips received);
• that all tips must be retained by the employee (except for a valid tip pooling arrangement); and
• that the tip credit shall not apply to any employee who has not been informed of these requirements.
The court however did not say that employers must inform employees of the tip credit provisions in writing.