Tipping culture is changing among consumers. No matter how you personally feel about tipping wait staff at restaurants, you can’t get around the rules of the Fair Labor Standards Act (FLSA) when paying waiters their fair tips. An Albuquerque New Mexico franchisee owner of two restaurants now owes $126,818 in back wages and the same amount in liquidated damages to 19 restaurant workers for keeping part of their fairly allotted tips and for not paying overtime correctly, for a total amount of $253,636. In addition, the restaurant is fined $616 in civil penalties by the Department of Labor’s Wage and Hour Division (WHD).
Keeping tips owed to employees is a violation of the FLSA
X.M. Investment LLC, Beemer Investments LLC, both operating as Crackin’ Crab, a restaurant based in Albuquerque with locations in Sante Fe, NM and Amarillo, Texas, was investigated by the WHD. The WHD found that two of the restaurants failed to pay the required minimum wage to employees. These restaurants also only paid overtime after 80 hours in a two-week period. The FLSA dictates that overtime wages are due for hours over 40 in a one-week period.
Workers due their tips
WHD Director Evelyn Ortiz in Albuquerque, New Mexico said, “Tips cannot be kept by the employer under any circumstances. The U.S. Department of Labor remains committed to protecting our nation’s workers.” The WHD offers a tip sheet to help employees and employers understand how tipping is to be distributed and how wages should be paid.
All tips received by the employee are to be retained by the employee, except for a valid tip pooling agreement, which as a rule, does not include managers and owners. If state law and the FLSA differ, the employer must use the rules most protective to the employee.
Make sure you know the rules for your business for managing tips to avoid an investigation and potential penalties from the Department of Labor.
Dawn Brotherton is a Sr. Staff Writer at The American Genius with an MFA in Creative Writing from the University of Central Oklahoma. She is an experienced business writer with over 10 years of experience in SEO and content creation. Since 2017, she has earned $60K+ in grant writing for a local community center, which assists disadvantaged adults in the area.
