If you’re a restaurant employee working for tips, you may be getting shorted overtime and not even realize it. One common quirk of overtime law is that tipped employees — usually restaurant workers like waiters, waitresses, and bartenders — are paid a subminimum wage, $2.13 for regular hours worked, as long as they earn enough tips to make $7.25 an hour. Most restaurant employees know they have a right to a make-up payment if their tips fall below the minimum wage. But they may not know about their overtime rights as well.
Most employees earn overtime pay of 1.5 times their regular rate, including cash wages, commissions, and certain bonuses. So if your regular hourly cash wage is $2.13 an hour, you might think your overtime rate is $3.19 or $3.20. Many restaurants do, in fact, pay $3.19 or $3.20 overtime pay to waitresses, waiters, or other tipped employees – and this is flatly illegal.
To understand why, look at the tipped employee provision of the federal overtime law. Section 3(m) of the Fair Labor Standards Act (FLSA) allows employers to claim a “tip credit,” which is defined as the current minimum wage minus the minimum wage in 1996. This amount is $5.12 (as of September 2022). As a result, an employer can claim five dollars and twelve cents of employee tips towards its wage obligations – but not a penny more. (This is why an employer cannot pay $0 in wages, then rely on tips to make up your entire minimum wage).
With me so far? The next step is figuring out the minimum wage overtime wage. That number is currently $10.88 (i.e., $7.25 times 1.5). Subtracting out the maximum $5.12 tip credit listed above, we see that the minimum overtime wage for tipped employees like waiters, waitresses, and bartenders is actually $5.76.
If you didn’t quite follow that logic, it’s ok – Congress defined these various terms in a confusing way. But there’s no rule requiring Congress to pass laws that are as simple or straightforward as possible. The important part is, for tipped employees, an overtime rate of under $5.76 an hour violates the law.
Many courts followed this logic in awarding back wages to restaurant workers. In Ventura v. Bebo Foods, the court ordered a restaurant to pay over $500,000 to its tipped employees for a series of labor law violations including overtime miscalculations. In Reyes v. Top Golf International, the Court denied the defendant’s motion to dismiss the overtime claim, holding that payment of an overtime rate under $5.76 an hour was a legal violation. That case later settled for an undisclosed sum.
If you are a tipped employee who has been shorted overtime, you may be able to recover the difference between the actual paid rate and the $5.76 minimum rate, as well as liquidated damages to double that amount. If you are the victim of an unlawful tip pool, the damages could be even higher. And through the FLSA collective action process, you may have the right to join with other co-workers to file a case together.
If you believe you have been shorted overtime pay, click here to contact New Orleans overtime lawyer Charles Stiegler today. The consultation is free. This is your money, you have worked for it, and you have earned it. We may be able to help you get it back.