The Fair Labor Standards Act (“FLSA”) establishes the federal minimum wage and authorizes an employer to provide it through payments directly from revenue and indirectly from the tips customers leave for employees engaged in an occupation in which he or she customarily and regularly receives more than $30 a month in tips.  Such an individual is a “tipped employee.” The portion of the wage supplied by tips for qualifying work is the “tip credit.”

The Florida Minimum Wage Act (“FMWA”), and the state constitution provision upon which it is based, allow the tip credit to satisfy a portion of the state minimum wage requirement up to the amount of the federal credit allowed by FLSA as of 2003, $3.02. The Florida minimum wage effective January 1, 2015 is $8.05.  The state adjusts the rate annually based upon inflation.

In 2011, the U.S. Department of Labor proposed amendments to regulations governing the tip credit. The Florida Restaurant & Lodging Association expressed concern at the time that the complexity of those proposed regulations would spawn litigation and increase confusion.  The National Restaurant Association sued the Department of Labor in an unsuccessful effort to preclude enforcement of the regulations.

Recent judicial decisions reflect the diligence of some companies in administering tip pools and the potentially devastating consequences of failure to meet minimum wage requirements.

In Rubio v. Fuji Sushi & Teppani, 2013 WL 230216 (M.D. Fla.), the employee, a server at a restaurant, obtained summary judgment upon demonstrating that her employer impermissibly paid kitchen chefs from the tip pool and retained a portion of the tips for itself.   The court’s summary judgment order established not only the liability of the company, but also of its president, individually, given uncontested evidence that he had responsibility for all pertinent company operations, including training, terminations, and payroll.  The court ordered a jury trial to determine the amount of the employee’s damages.

By contrast, in Garcia v. Koning Restaurant International, 2013 WL 8150984, the employee contended that the employer did not provide the requisite notice or actually pay the minimum wage, taking into account its alleged failure fully to reimburse employee expenses.  The court found that the employer disproved those allegations and entered partial summary judgment in its favor on those issues. Similarly, in Palacios v. Hartman and Tyner, 2015 WL 7152745 (S.D. Fla.), the employees, poker dealers in a casino, contested their employer’s inclusion of cashiers in the tip pool.  The casino contended and the court determined that the casino’s cashiers were tipped employees because they received in excess of $30 monthly in tips from patrons.

Employee claims of the kinds made in RubioGarcia, and Palacios present significant risks for hospitality industry employers. Companies that employ tipped workers– and any individuals who so control operations in such companies as to be deemed “employers” in their individual capacities– need proactively to evaluate the way they administer tip pools and keep their practices in compliance with FLSA regulations.