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An investigation confirmed that Kentucky-based Heine Brothers Coffee was improperly handling tips paid to employees by allowing managers to take a portion of the tips. The incident is noteworthy both in the sum of money paid and the fact that such practices often go on for years, unless and until someone reports them. The Lore Law Firm can represent you if your employer has failed to pay you for all tips earned or violated your wage rights in some other way.

What Heine Brothers Did

A tip from a group representing unionized workers at Heine Brothers exposed a significant violation of the Fair Labor Standards Act (FLSA). The company regularly diverted employee tips to managers, which ran afoul of the 2020 revisions to the FLSA. Under that federal law, all tips must be given to hourly workers – not to their managers, supervisors, or employers.

The DOL reports that once this behavior was exposed, Heine Brothers repaid $150,000 in back pay, plus another $150,000 in liquidated damages, to 492 workers whose wage rights were violated by the tip-diverting practice. This case highlights the critical role that tips play in helping employees make ends meet. Sadly, far too many tipped workers fall victim to wage theft and are unaware that they are entitled to more pay.

How Federal Wage Rules Affect Tipped Employees

The FLSA governs a broad range of wage and pay matters such as minimum wage, overtime, and tips. This sweeping federal law was updated in 2020 to prohibit store managers (someone with hiring and firing authority) from sharing in tips earned by wait staff. Company managers had been participating in tip sharing since the company started, and the practice continued even though it directly contradicts the revised FLSA rules.

What You Need to Know About Tips

After a period of regulatory updating that began in 2020, the following rules went into effect in April 2021:

  • Employers may not keep employees’ tips under any circumstances
  • Managers and supervisors also may not keep tips received by employees (this includes through the use of tip pools)
  • Employers that pay the full minimum wage and take no tip credit may permit non-tipped employees to participate in the tip pool
  • Employers that collect tips for purposes of a mandatory tip pool must generally fully redistribute those tips within the pay period
  • Employers that do not take a tip credit, but collect employees’ tips for purposes of a mandatory tip pool, must maintain payroll or other records with certain information about the employees and the tips they earn

If you are a tipped employee, it is possible that your employer is not following all of the various regulations concerning tips. This is especially because, as mentioned above, the rules were recently updated. Many employers are unaware of what the rules are, and others just choose to continue with business as usual, particularly when it is cheaper for them to do so. But that’s no excuse for denying you the pay you deserve.

Do you have questions about tips or compensation for working overtime? Fill out The Lore Law Firm’s intake form for a free and confidential review of your potential claim today.

Michael Lore is the founder of The Lore Law Firm. For over 25 years, his law practice and experience extend from representing individuals in all aspects of labor & employment law, with a concentration in class and collective actions seeking to recover unpaid back overtime wages, to matters involving executive severance negotiations, non-compete provisions and serious personal injury (work and non-work related). He has handled matters both in the state and federal courts nationwide as well as via related administrative agencies. If you have any questions about this article, you can contact Michael by using our chat functionality.