Workforce Bulletin

Rules relating to tip credit and pooling have resulted in significant debate among legislators, regulators, and the courts, leading to confusion, further litigation, and, in many cases, substantial liability or settlements involving employers that operate in the hospitality industry.  Today, the U.S. Department of Labor (“DOL”) published proposed rulemaking that aims to bring greater clarity to the morass of tip-related legislation, as well as previous agency rules and interpretations.  I describe below some of the notable elements of these proposed rules.

The proposed ...

Kara Maciel, a Member of the Firm in the Labor and Employment, Litigation, and Health Care and Life Sciences practices, in the Washington, DC, office, was quoted in an article titled “For Fine Dining Sector, Tip Pools Can Be Legal Trap.” (Read the full version – subscription required.)

Following is an excerpt:

As a wave of lawsuits hits restaurants over tip pool violations, fine dining establishments packed with sommeliers, mixologists and other high-end specialists that tend to take on some managerial duties face the greatest risks of becoming targets for litigation or ...

Our colleague Kara Maciel, the editor of Hospitality Labor and Employment Law Blog, was quoted in an article titled "Six Tips on Not Getting Tripped Up by FLSA's Tipped Employee Rules" that was recently published in Thompson's HR Compliance Expert.

Following is an excerpt:

Employers need to make sure they are following both federal Fair Labor Standards Act requirements and state laws regarding tipped employees, said Kara Maciel of the firm Epstein Becker Green during a recent seminar focused on tipped employees. …

However, every state has its own set of rules regarding tipped ...

Our colleagues Kara M. Maciel and Jordan B. Schwartz will be joined by special guest, David Sherwyn of Cornell University’s School of Hotel Administration in hosting a roundtable and webinar on May 29 (1:00 p.m. ET).  This interactive simulcast event will discuss strategies and tactics that employers can implement to stay ahead of the curve and ensure compliance with many of the most pressing wage and hour issues plaguing the hospitality industry.

Topics will include:

• Using the tip credit to your advantage: tip credit, tip pooling, and service charges
• Creating valid tip ...

By Kara Maciel

Our national hospitality practice frequently advises restaurant owners and operators on whether it is legal for employers to pass credit card swipe fees onto employees or even to guests, and the short answer is, yes, in most states. But whether an employer wants to actually pass along this charge and risk alienating their staff or their customers is another question.

With respect to consumers, in the majority of states, passing credit card swipe fees along in a customer surcharge became lawful in 2013. Only ten states prohibit it: California, Colorado, Connecticut ...

By Brian W. Steinbach

Since 2008, the District of Columbia’s Accrued Sick and Safe Leave Act (“ASSLA”) has required D.C. employers to provide employees with paid leave (i) to care for themselves or their family members, and (ii) for work absences associated with domestic violence or abuse. Specifically, ASSLA provides covered workers with the ability to earn and take from up to three to up to seven days of covered paid leave each year, depending on the size of the employer.

On January 2, 2014, Mayor Vincent C. Gray signed the Earned Sick and Safe Leave Amendment Act of 2013 ...

Our colleagues Kara Maciel and Jordan Schwartz, both of Epstein Becker Green, recently cowrote an article for PLC titled "Tipped Employees Under the FLSA."

Following is an excerpt:

Wage and hour lawsuits certainly are not new phenomena, but in recent years, service industry employees have increasingly made claims regarding tips and service charges. In particular, employers in states such as Massachusetts, New York and California have seen a surge in class actions involving compulsory tip pools and distributions of service charges to employees. Commonly targeted employers ...

By:  Kara M. Maciel

The following is a selection from the Firm's October Take 5 Views You Can Use which discusses recent developments in wage hour law affecting the hospitality industry.

IRS Will Begin Taxing a Restaurant’s Automatic Gratuities as Service Charges

Many restaurants include automatic gratuities on the checks of guests with large parties to ensure that servers get fair tips. This method allows the restaurant to calculate an amount into the total bill, but it takes away a customer’s discretion in choosing whether and/or how much to tip the server. As a result of this ...

Our colleague Kara M. Maciel of Epstein Becker Green wrote a wage and hour update in this month’s Take 5 labor and employment newsletter.

Here’s a preview of the five items:

1. IRS Will Begin Taxing a Restaurant's Automatic Gratuities as Service Charges
2. The New DOL Secretary, Tom Perez, Spells Out the WHD's Enforcement Agenda
3. DOL Investigates Health Care Provider and Obtains $4 Million Settlement for Overtime Payments
4. Federal Court Strikes Down DOL Tip Pooling Rule
5. Take Preventative Steps When Facing WHD Audits

Read the full article here.

Our colleague Kara M. Maciel of Epstein Becker Green wrote a wage and hour update in this month’s Take 5 labor and employment newsletter.

Here’s a preview of the five items:

1. IRS Will Begin Taxing a Restaurant's Automatic Gratuities as Service Charges
2. The New DOL Secretary, Tom Perez, Spells Out the WHD's Enforcement Agenda
3. DOL Investigates Health Care Provider and Obtains $4 Million Settlement for Overtime Payments
4. Federal Court Strikes Down DOL Tip Pooling Rule
5. Take Preventative Steps When Facing WHD Audits

Read the full article here.

By: Kara M. Maciel

Many restaurants include automatic gratuities on guests’ checks with large parties to ensure servers get fair tips. This method allows the restaurant to calculate an automatic gratuity or tip into the total bill, but it takes away the customer’s discretion in choosing whether and/or how much to tip the server. As a result of this removal of a customer’s voluntary act, the IRS has decided that it will separately tax automatic gratuities.

In 2012, the IRS issued a ruling to clarify earlier tax guidance on tips, particularly automatic gratuities, but ...

By:      Kara Maciel and Jordan Schwartz
As discussed in prior blogs, due to confusion surrounding FLSA tip pool requirements, the U.S. Department of Labor (“DOL”) Wage and Hour Division enacted a strict rule in 2011 related to proper tip pooling and service charge practices. This rule was met with swift legal challenges, and earlier this week the U.S. District Court for the District of Oregon concluded that the DOL had exceeded its authority when implementing its final rule. See Oregon Rest. and Lodging Assn. v. Solis, No. 3:12-cv-01261 (D. Or. June 7, 2013).

Inconsistent ...

By:  Kara M. Maciel

In April of 2011, the U.S. Department of Labor (“DOL”) changed its rule defining the general characteristics of tips in an attempt to overrule the U.S. Court of Appeals for the Ninth Circuit’s decision in Cumbie v. Woody Woo, Inc. ruling that the FLSA does not impose any restrictions on the kinds of employees who may participate in a valid tip pool where the employer does not claim the “tip credit.”

DOL’s Recent Position on Tip Pool Participation

The DOL’s amended rule provides that tips are the property of the employees, and may not be used by the employer ...

By Evan Rosen

Hospitality employers continue to get hit with class action lawsuits alleging that they are unlawfully taking the tip credit for their employees.  Under federal law, and the law of most states, an employer may pay less than the minimum wage to any employee who regularly and customarily receives tips.  The difference between the minimum wage and the hourly wage rate is called the "tip credit."  

This compensation system, when administered correctly, has the advantage of saving employers a significant sum of money.  But employers must implement ...

By  Kara Maciel and Casey Cosentino

The restaurant and hospitality industries are no strangers to the tidal wave of wage and hour class action lawsuits. Restaurants and hotel operators located in states with employee-friendly laws like Massachusetts, New York, and California, are particularly vulnerable. This vulnerability was recently confirmed on April 30, 2012, when Texas Roadhouse, Inc. agreed to pay $5 million to settle a putative class action suit filed by wait staff employees from nine restaurants in Massachusetts.

In Crenshaw, et. al, v. Texas Roadhouse, Inc. (No ...

By Matthew Sorensen

Wage garnishment can pose a number of potential problems for hospitality businesses. This is particularly true where the employee whose pay is subject to garnishment receives tips.

Garnishment is a legal procedure in which an employee’s earnings must be withheld by an employer for the payment of a debt under a court order. When faced with a garnishment order involving a tipped employee, the employer must determine whether all or part of the employee’s tips must be included in the amounts withheld under the garnishment order. This question turns on ...

by:  Matthew Sorensen

 1.      Deadline For Compliance With New ADA Accessibility Rules Approaching:

 On March 15, 2012, hospitality establishments will be required to be in compliance with the standards for accessibility set by the Department of Justice’s final regulations under Title III of the ADA (2010 ADA Standards). The regulations made significant changes to the requirements for accessible facilities, and will require additional training of staff on updated policies and procedures in response to inquiries from guests with disabilities. Among the most significant ...