Wage theft costs restaurant workers millions of dollars each year. Withholding wages, skimming tips, and illegal deductions mean less money in your paycheck. Here's what restaurant workers need to know about wage theft.
Tipped workers make $36.4 billion in tips each year. If restaurants illegally withhold tips, restaurant workers lose out on a major source of income. Tips legally belong to the restaurant workers, not the restaurant owners. And restaurant owners cannot keep part of your tips.
In most states, restaurants can pool tips to distribute them to tip-eligible employees. But if restaurants give tips to non-eligible employees, it takes money from tipped workers. For example, managers are not eligible to receive tips. Typically, "front of the house" employees like servers, hosts, food runners, and bartenders can receive tips, while "back of the house" employees like managers, chefs, and other kitchen staff cannot receive tips. However, tip pool laws vary by state.
Minimum Wage Violations
Minimum wage violations cost employees an estimated $15 billion in wages each year. Employers must pay their employees the federal minimum wage or the state or local minimum wage, whichever is higher, for every hour worked.
Violations of minimum wage laws particularly affect tipped employees. In many states restaurant workers earn a lower minimum wage because of the "tip credit." Employers can legally pay tipped employees a lower hourly rate if their tips make up the difference. However, miscalculating the tip credit can cost restaurant workers. Consider a server who put $100 into the tip pool after her shift and received $80 back in tips. If the restaurant calculated her tip credit based on the $100 instead of her actual tip earnings of $80, the server loses money.
Restaurant workers are eligible for overtime pay. Under federal laws, employees who work more than 40 hours in one week must receive time-and-a-half for the overtime hours. Even tipped employees must earn overtime pay. However, restaurant owners cannot calculate overtime pay based on the lower tipped employees minimum wage. Instead, overtime must be based on the full minimum wage.
Paying a flat rate or shift pay for all hours worked can also violate overtime laws. Restaurant owners who don't follow overtime laws may owe back wages and damages to their employees.
Employers can legally deduct money to cover income taxes, payroll taxes, and benefits. However, employers cannot take certain deductions from their employees' paychecks if it brings their pay below the minimum wage. For example, under federal law restaurant owners cannot deduct money to cover property damage like broken dishes if it brings the employee's salary under the minimum wage.
In some states, restaurant owners cannot deduct for a broken dish, spoiled food, or to cover cash shortages, like when a customer walks out on their bill. In New York, for example, employers cannot deduct the cost of a customer's meal from the server's paycheck. Laws on deductions vary by state, so restaurant workers should consult a lawyer to learn more about the laws in their state.
Withholding Mandatory Service Charges
Many restaurants and events venues add a mandatory service charge to customers' bills. However, in some states those service charges must go to servers, unless the restaurant clearly states the fee is administrative rather than a gratuity.
Under New York law, for example, mandatory service charges are considered tips for service. Restaurant workers can miss out on millions in wages if owners withhold mandatory service charges.
Restaurant owners must pay workers for every hour worked, even those before clocking in or after clocking out. For example, if a restaurant worker spends 20 minutes prepping the restaurant to open each morning before she officially clocks in, she must receive pay for that time. The same applies to restaurant workers who close the restaurant.
Additional resources provided by the author
Wage theft is a major problem for restaurant workers. Fortunately, federal, state, and local laws protect restaurant workers who've lost wages because of unfair tipping practices or other types of wage theft. If you've experienced wage theft working at a restaurant, reach out to an employment lawyer in your state to learn more about your protections.
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