Tipped Workers Must Get Federal Minimum Wage for Non-Tipped Tasks

September 24, 2018

A federal appeals court recently decided that federal labor law requires employers to pay full minimum wage to tipped workers, such as waitresses, when they perform “untipped tasks.” Untipped tasks include any work that doesn’t include the possibility of earning tips, such as cleaning bathrooms or sweeping floors.

For tipped work, such as taking order or serving food, the federal rule remains the same. Under federal law on tipped workers, employers don’t need to pay full minimum wage. They can deduct tips from the federal minimum ($7.25 per hour) when calculating the amount of wages they must pay.

Further details on the court’s ruling and the facts of the case are below.

The Marsh v. J. Alexander’s Decision Expands Tipped Workers’ Rights under Fair Labor Standards Act (FLSA)

Last week, the United States Court of Appeals for the Ninth Circuit held in Marsh v. J. Alexander’s LLC that, under the federal Fair Labor Standards Act, tipped employees are entitled to minimum wage, rather than the lower “tip credit wage,” when they perform non-tipped tasks.  This means that, if a server spends time cleaning a restaurant before opening or after closing, for example, that employee is entitled to the full minimum wage for that time.

Generally, where an employee is paid in part by tips, her employer may take a “tip credit” that allows it to pay her as little as $2.13 per hour (depending on the state), as long as the tips plus the lower wage add up to minimum wage.  However, many servers and bartenders alleged in this case that their employers abused this rule by treating them as tipped employees even when they were performing non-tipped tasks.  Plaintiff Alec Marsh, for example, spent almost half his weekly time on tasks that did not produce tips, like cleaning restrooms, stocking ice, and taking out the trash, but was paid the hourly tip credit wage, rather than the higher minimum wage, for all of his working hours.

Here, the Ninth Circuit concluded that tipped workers are entitled to their full hourly minimum wage for both 1) substantial time (more than 20%) completing untipped tasks “related” to the tipped work, and 2) time spent performing tasks “unrelated” to the tipped work.  According to the court, this ruling ensures that tips are “a gift to the server,” rather than “a cost-saving benefit to the employer.”

State Law May Differ on the Rights of Tipped Workers

Your state’s laws may be different than federal labor law under the Fair Labor Standards Act (FLSA).

If your state’s laws are more protective of tipped workers’ rights, your employer must follow your state’s tip credit law.

California employment law, for example, is better for tipped workers than federal law. California requires tipped workers receive 100% of the tips they earn, in addition to receiving full California minimum wage ($11 in 2018).