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Overtime Pay Laws for Restaurant Workers

Violations of the FLSA

Restaurants are routinely found to be in violation of the Fair Labor Standards Act (FLSA) by failing to pay their employees at least minimum wage and overtime pay for hours worked over 40 per week.

For employees who earn tips, employers are allowed to take a ‘tip credit’ and pay them a lower rate than minimum wage – $2.13 per hour under federal law.  However, the employee’s tips combined with their direct cash wage must equal the federal minimum wage of $7.25/hour (or higher) or the employer must pay them the difference.

As many states have higher minimum wage rates than federal law, employers in those states would need to comply with the state law when taking a tip credit for their tipped employees.

Overtime Claims

In addition, tipped employees are often not paid overtime pay when they work more than 40 hours per week.  The overtime pay rate should be calculated by multiplying the full minimum wage rate – not the reduced tip credit rate of $2.13/hour – by time and a half.  The tip credit amount is then deducted from that amount. 

For example:  If a server is paid $2.13 per hour and works 45 hours for the week, overtime pay would be calculated as follows:

  • Overtime based on Minimum Wage = $7.25 x 1.5 = $10.88 
  • Less Tip Credit taken = $7.25-$2.13 = $5.12
  • Overtime Rate = $10.88-$5.12 = $5.76 per hour
  • Overtime pay due = 5 hours x $5.76 = $28.80 Plus
  • Regular pay = $2.13 x 40 hours = $85.20

Many non-tipped employees, such as cooks and dishwashers, are also not paid overtime pay correctly.  As observed by the Labor Department, and as anyone who has worked in restaurants knows, “there is often a lot of abuses in the restaurant industry” when it comes to the overtime laws for restaurant workers.  

Tip Pool Violations

Under the FLSA regulations, tips are the property of the employee.  Previously this meant that tips could only be shared among employees who customarily and regularly receive tips, such as wait staff, bellhops, counter personnel bussers, and bartenders.  This meant employers were not allowed to force tipped employees to share tips with non-tipped employees such as dishwashers, chefs, cooks, and janitors.

When employers did not take a tip credit and paid tipped employees the full minimum wage, there was a question as to whether the employer could keep employee tips.  Many courts ruled they could.  The Obama Department of Labor disagreed and issued regulations stating that tipped employees were legally entitled to all tips and could only be required to share tips among customarily non-tipped employees, even if the employer paid full minimum wage. 

However, the Trump administration proposed rules to eliminate this restriction which, in effect, would have meant employers who do not take a tip credit could have kept all employee tips. Congress wanted to prevent that so amended the FLSA in the 2018 Appropriations Act.  The new changes still bar employers from keeping any employee tips but allows employers who do not take a tip credit to force their tipped employees to share their tips with non-tipped employees like cooks and dishwashers.  Supervisors and managers are not allowed to participate in tip pools.

Non-Tipped Duties

The Trump Administration has also eliminated protections for tipped employees that prevented employers from requiring these employees spend an excessive amount of time on non-tipped duties.  However these new regulations are in conflict with some court rulings.  See this page for further information on this. 

Do You Believe You Have an Overtime Claim?

If you are a current or former restaurant worker (waiter, waitress, assistant manager, etc.) and believe that you may have a claim or would like to get more information about overtime pay, please call us at 1-866-559-0400 or submit your information using our convenient Case Evaluation form for a FREE and CONFIDENTIAL review of your circumstances.