The "tip credit" applies to restaurant workers such as bartenders and waiters who regularly receive tips as part of their jobs. But does the tip credit apply to all the time that a bartender, waiter or server works? This question is raised by bartenders and servers who have sued Applebee's Restaurants in Michigan and claim that the "tip credit" was wrongly applied to work that they did which is not tipped work.
Source: ABC 10 U.P.
Here's how the tip credit is supposed to work: The "tip credit" rule allows employers to pay employees such as servers and bartenders who regularly receive tips at an hourly rate of $2.13 per hour. The theory being that tips make up the difference between $2.13 and the minimum wage, which is now $7.25 per hour. But if waiters or bartenders spend more than 20% of their time doing non-tipped work such as setting up or prep work, the time spent performing these non-tipped duties is not subject to the tip credit and the employees must be paid at the ordinary minimum wage at least.
The federal Department of Labor has long taken the position and a federal court of appeals has upheld the Department's position that employees who spend "substantial time" (defined as more than 20%) performing related but nontipped duties should be paid at the full minimum wage for that time without the tip credit. The court decision is Fast v. Applebee's International, Inc., No. 10-1725 (8th Cir., April 21, 2011).
Robert Abell discussed this case on his Kentucky Employment Law Blog: Tip Credit Not Applicable to Bartenders and Servers Where More Than 20% of Work Is Performing Related But Nontipped Duties.
If the tip credit has been misapplied to you and you've not been paid the wages you've earned, contact Lexington wages and overtime lawyer Robert Abell, who represents individuals and employees seeking to recover the wages and overtime they've earned but not been paid.