By Chris M. Mason, Attorney, Jennings, Strouss & Salmon, P.L.C.
To kick off Arizona Restaurant Week, below are tips to help Arizona restaurant employers comply with laws involving tipped employees and avoiding costly fines and litigation:
Tip 1: Be Sure Tipped Employees Earn Minimum Wage
Arizona and federal law permits employers to take a “tip credit” towards minimum wage for tipped employees. This credit allows Arizona employers to apply up to $3 in tips earned per hour by an employee towards Arizona’s $11 per hour minimum wage requirement for 2019. So, employers would only need to pay tipped employees $8 per hour to comply with minimum wage requirements.
Tip 2: Be Sure Tipped Employees ACTUALLY Earn $3 per Hour in Tips
If tipped employees earn less than $3 per hour in tips, the employer must make up the difference to comply with the minimum wage requirement.
Tip 3: Proactively Monitor Employees’ Tip Earnings to Ensure Compliance with Applicable Law
This is where employers need to be extra vigilant. Even if a tipped employee reaches the $3 per hour tip threshold during a shift performing tip related duties, be aware of attendance at meetings and training, and tasks performed that are unrelated to the tipped duties. In these instances, employers must pay tipped employees the full minimum wage.
Tip 4: Report Tips to Taxing Authorities
Employers should report tips to the taxing authorities. If the reported tips total is less than $3 per hour for an employee, but the employer is taking a full $3 per hour in tip credit for every hour the employee worked, this computes to trouble for the employer.
Tip 5: Never Pressure Employees to Falsely Report Tips They are Not Actually Earning
This is especially important to consider if tipped employees, such as servers, must tip other employees, such as bussers and bartenders. The employee only needs to claim tips that are taken home.
Tip 6: Understand How to Manage Tip “Pooling”
Tip “pooling” can cause a number of problems. Employers must notify employees of tip pooling in advance. Since tipped employees must chip in a portion of their tips, the pools should only include workers that regularly and customarily receive tips, such as wait staff, bussers, and bartenders. Workers that do not regularly and customarily receive tips, such as cooks and dishwashers, should not be included in the pool and should be paid full minimum wage. If an employer takes a “tip credit,” it can only count the tips the employee actually takes home, up to $3 per work hour, against the minimum wage requirement.
Tip 7: Employers Cannot Keep Tips for Themselves or the Business
Employers should not be taking a portion of an employee’s earned tips and are not eligible for payment from pooled tips.
Tip 8: Consult Experienced Employment Counsel
Employers should always consult with employment counsel for advice on how to comply with pay and employment law requirements.
For more information on this topic or other bankruptcy matters, please contact Mr. Mason.