PUBLICATIONS

Eleventh Circuit Allows Employer to Share Employee's Tips as Long as It Pays Employee Minimum Wage

Date   Feb 2, 2018

Federal regulations currently treat tips as the employee’s property, regardless of whether the employer pays that employee the minimum wage or whether it uses a tip credit to satisfy the minimum wage requirement. Recently, the federal Department of Labor (DOL) proposed a rule that, if passed this year, would allow employers to require the sharing of tips with employees who do not customarily receive direct tips (such as restaurant cooks, dish washers, and similar workers), so long as the employer pays employees the full federal minimum wage of $7.25 per hour. Employers who use the tip credit option to satisfy the minimum wage obligation would not be allowed to require tip sharing with workers who do not customarily receive tips.

Yet, in Malivuk v. Ameripark, LLC (11th Cir. 2017), the Eleventh Circuit (which covers Florida, Georgia and Alabama) already determined what the DOL currently is proposing. Malivuk worked for Ameripark as a valet driver. Ameripark paid her the minimum wage and then took a portion of the tips she and her fellow valet drivers earned. Malivuk sued, claiming Ameripark violated § 203(m) of the Fair Labor Standards Act (FLSA).

In rejecting Malivuk’s claims, the court first noted that, in May 2011, the DOL implemented 29 C.F.R. § 531.52, which declared that “[t]ips are the property of the employee whether or not the employer has taken a tip credit under [§203(m)] of the FLSA.” Thus, the regulation specified that only the tipped employee and others who customarily and regularly receive tips (such as servers, bartenders, greeters, and similar employees) may retain the tips, regardless of whether the employer paid the tipped employee the minimum wage.

Without delving into whether the regulation was entitled to appropriate deference, the court -- and the DOL -- recognized that only the DOL, and not an employee or her attorney, could seek to enforce § 531.52. Looking more closely at the FLSA, the court held that the statute only authorizes a private lawsuit for unpaid minimum wages (§206) or unpaid overtime compensation (§207). Accordingly, because Malivuk’s tip-withholding claim implicated neither §206 (minimum wage) nor §207 (overtime), she had no viable claim. As the DOL put it, because she “is not pursuing minimum wage claims or overtime claims, but instead seeks only to collect improperly withheld tips, she does not have a cause of action under the FLSA.”

Thus, at least in the Eleventh Circuit, as long as the employer pays the employee the minimum wage ($7.25) without using the tip credit (paying an employee $2.13 per hour and making up the remainder using the tips received), the employer can require the employee to share tips with other employees or with the employer without fear of being held liable in a lawsuit for improperly taking an employee’s tips.

If you have any questions regarding this decision or other wage/hour issues, please feel free to contact the author of this Alert, Jeff Mokotoff, jmokotoff@fordharrison.com, partner in our Atlanta office and member of FordHarrison’s Restaurant Industry and Wage/Hour practice groups. Of course, you may also contact the FordHarrison attorney with whom you usually work.