Servers at a Hooters Restaurant in Birmingham have sued for unpaid overtime compensation and wages based on (1) an illegal tip-sharing scheme; and, (2) failure to pay wages for set-up and clean-up duties that take up more than 20% of their worktime. The servers claim the tip-sharing scheme is illegal, because they have to share tips with employees who do non-tipped work like kitchen utility work. They also claim that they spend more than 20% of their worktime on set-up and clean-up duties that do not generate any tips. 

Source: AL.com

Here's what's going on here: Employers are allowed to apply the "tip credit" to employees that work in jobs that customarily receive tips, jobs such as servers, waiters and bartenders.  The "tip credit" means that the employee is paid by the employer an hourly wage of $2.13 per hour with the presumption that the tips received by the employee will at least make up the difference between $2.13 and the applicable minimum wage.  While tipped employees may be compelled to participate in a tip pool with other tipped employees (all the servers throw their tips in and share them, for instance), it violates the "tip credit" rules for employees in non-tipped jobs (for instance, dishwasher and kitchen utilitiies) to also participate in the tip pool.

Learn more: Tip-Pooling: What Kinds of Pools are Legal or Illegal?Who is an employee subject to the tip credit?

The second part is that the "tip credit" cannot by applied to time worked by the employee that does not involve tipped work such as for these Hooters' servers set-up work before customers start coming in and clean-up work after the last table. But this is true only if the nontipped work duties take up more than 20% of the employee's work time.  If it does, the employee must be paid at least the minimum wage not the tip credit rate of $2.13 per hour.  Learn more: The Tip Credit For Waiters & Bartenders: Does It Always Apply?

Lexington, Kentucky overtime lawyer Robert Abell represents employees and individuals to recover the wages and overtime they've earned but not been paid; contact him at 859-254-7076. 

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