Tip pooling a complicated issue under FLSA
A small pizzeria chain is facing a class action lawsuit after a former employee alleged that the company illegally distributes pooled tips.
At the heart of the suit is a claim that the tip pooling brought hourly pay for servers below the minimum wage, according to legal news source Law360.
Tipping pools are considered legal under the Fair Labor Standards Act, but the aggregate money must only be shared among employees who usually receive tips. The plaintiff in the case argued that because cooks and other employees included in the pool do not usually receive tips, the pool was invalid under the FLSA.
The former worker has also alleged that the company is improperly using the tip credit provision of the FLSA.
The tip credit available in the FLSA allows employers to reduce their minimum wage obligations for workers who receive gratuities. In terms of federal minimum wages, employers can take a maximum credit of $5.12 per hour, per eligible employee - the difference between the federal minimum wage of $7.25 and the tipped minimum wage of $2.13. Businesses must provide workers with notice that they are using the tip credit as well as the stipulations that go along with it.
Companies can use time and attendance software to accurately account for tip credits and track the wages of all employees.
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