The Fair Labor Standards Act (FLSA) and most states permit restaurants to pay tipped employees a tip-credit rate, an amount less than the minimum wage with the expectation that tips will make up the difference. It goes without saying, however, that the system raises questions, such as how to pay a tipped employee when he or she performs non-tipped functions at work. Earlier this month, the United States Court of Appeals for the Seventh Circuit provided some clarity.
The case, Schaefer v. Walker Bros. Enterprises, — F.3d —, 2016 WL 3874171 (7th Cir. July 15, 2016), was brought by two classes of Original Pancake House servers. The first class claimed that the restaurants were required to pay them the minimum wage rate for the time they spent performing non-tipped duties. The second class argued that the disclosures provided by the restaurants regarding compensation of tipped employees failed to meet federal requirements.
In addition to performing normal server tasks like taking orders and delivering food, the servers in this case were also obligated to spend about 10 to 45 minutes each shift performing tasks they argued were completely unrelated to traditional server functions. For example, they were required to wash and cut fruits and vegetables; prepare applesauce, jellies and salsas; restock bread bins and replenish condiment dispensers; fill ice buckets; brew hot drinks; clean toasters, burners and woodwork; and dust picture frames. The servers argued that the restaurants should not be allowed to use the tip-credit rate for the time they spent performing these functions because they are unrelated to tipped tasks. The Seventh Circuit disagreed. Continue Reading