"Split Pay" The 20% Rule For Tipped Employees

Tip Credit is a federal law that allows employers to take a 'credit' against the minimum wage, and pay lower wages to employees who earn tips.

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PostPosted: Sat Nov 05, 2011 8:16 pm
Domino's is generally split pay. It really depends what franchise or cooperate store you work for. If you live in NY or CA, you must be paid minimum wage and IRS mileage allowance because of the lawsuits. I spoke to DOOL about these issues many times, and I have not seen a DOOL investigation where they considered a driver a "Tipped" employee. Funny this topic came up today, as I explained to the store manager the assistant need to quit cheating on routing me out on singles, and cheating on delivery times, as it was cheating me out of pay. I wish I could read his upcoming review.
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PostPosted: Tue Dec 06, 2011 9:00 pm
The Future of Tip Credit
– And The Businesses That Depend Upon It


http://www.jdsupra.com/post/documentVie ... 2dc5f5957a

By J. Hagood Tighe and Karen Luchka (Columbia)
The U.S. Supreme Court is being asked to decide what amounts to
the future of tip credit for many businesses – particularly in the hospitality
industry. In short, the issue is whether an employer can continue to pay tip
credit employees on a tip credit basis if they spend more than 20% of their
work time on duties that did not produce tips.

Background

All employees must be paid the minimum wage under federal and
state law. The FLSA allows employers to satisfy the minimum wage
requirement by taking a “tip credit.” For employees who regularly receive
more than $30.00/month in tips, the tip credit provisions of the FLSA
permit an employer to pay its tipped employees not less than $2.13 per
hour in cash wages and take a “tip credit” equal to the difference between
the cash wages paid and the federal minimum wage.

The tip credit may not exceed the amount of tips actually received
and under the current minimum wage may not exceed $5.12/hour.
Therefore, for example, under federal law an employer could pay a tipped
employee $2.13/hr and take a tip credit of $5.12/hr, provided the tipped
employee makes sufficient tips to cover the tip credit.

The use of tip credit, though simple in its concept, can also be
complicated by state laws. Some states forbid the use of tip credit, while
others impose significant recordkeeping and/or notice requirements on the
use of tip credit.

The 20% Rule And Applebee’s

On occasion, tipped employees are asked to perform duties that are not
tip generating – such as rolling silverware, cleaning up at the end of the
shift, etc. The law recognizes and permits tipped employees to perform
some related non-tipped duties. But, federal law does not say how many
“related non-tipped duties” an employee can perform and still be paid on
a tip credit basis.

The U.S. Department of Labor has adopted the “20% rule.” The DOL
takes the position that an employer may not take a tip credit for time spent
on non-tipped duties if the employees spend more than 20% of their time
performing such non-tipped duties.

In 2007, a federal court in Missouri adopted the DOL’s 20% rule in a
class action potentially involving more than 40,000 current and former
tipped employees of Applebee’s. The U.S. Court of Appeals for the 8th
Circuit agreed. The Court concluded that the employer could not apply tip
credit to time tipped employees spent performing non-tipped duties if those
duties exceeded 20% of the employee’s work time. So, if an employee
spent 70% of his time serving customers and 30% of his time doing other
tasks such as cleaning the store or answering phones, an employer would
have to pay the employee at least minimum wage for the 30% of the time
spent doing non-tipped duties.

The Practical Impact

These decisions, if upheld, will require employers to keep very
careful track of not only the time tipped employees spent working, but also
what tasks they were performing during that time. Additionally, a likely
outcome of the decision is that many employers would be forced to pay
tipped employees at two different pay rates: one for time spent performing
tipped duties and minimum wage (or higher) for time spent performing
non-tipped duties.

The Applebee’s decision is causing heartburn for many hospitality
employers who fear they face a future of percentage calculations and
multiple wage rates for tipped employees. The decision has wound its way
up through the court system for the past few years and Applebee’s has now
asked the US Supreme Court to decide. If the Supreme Court adopts the
20% rule, the decision could cause many hospitality employers to
reevaluate the use of tip credit for tipped employees at all.
That would
significantly alter the way employers maintain payroll records,
compensate tipped employees, and manage their business. For some, there
may be no choice but to close their doors – meaning these tipped
employees will not be paid at all.

What To Do Now


High-profile class actions regarding the compensation of tipped
employees underscore the importance of carefully evaluating your payroll
practices. The DOL, courts, and plaintiffs’ attorneys are scrutinizing
employers’ use of tip credit, distribution of service charges, deductions
from tipped employee wages, and tip pooling practices.

Despite the increased focus on the compensation of tipped employees,
the law in the area is unsettled. As a result, hospitality employers are
wrestling with many questions about the best practices for paying tipped
employees. Of note, the court found that, based on Applebee’s admissions,
it had the ability to track and pay employees for non-tipped duties. Some
businesses have already moved to this type of “split pay” process, paying
tip credit only for tip-related duties and minimum wage for all other duties.
While not practical for all types of tipped employees, this is likely the
safest option until this issue is resolved.

Notwithstanding the outcome of the Applebee’s decision, employers
are advised to carefully review their policies and practices for
compensating tipped employees to ensure compliance with the law.
To best insulate your company from costly investigations and litigation,
hospitality employers should explicitly and regularly communicate to
employees and managers the importance of accurately recording hours
worked and tips received, train managers and supervisors on the laws
regarding compensation of tipped employees, and regularly audit time
records. The failure to do so, could subject employers to costly litigation.

For more information contact either of the authors:
htighe@laborlawyers.com, kluchka@laborlawyers.com, or call
803.255.0000.
"If you ain't on the road, you ain't makin' money!" - gregster

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PostPosted: Wed Dec 07, 2011 1:18 am
Yeah tip credit has finally reached my area. I was told by one of the "clueless" drivers I know from PH that the new driver hires are starting at $4.25 an hour. (Of course he thinks that he will stay at $7.75 an hour....hence the "clueless" label). I tried to warn him that it was coming, but he said I did not know what I was talking about.

I told him that he won't be staying at $7.75 and again he said I didn't know what I was talking about. I told him you said that last time, but I don't really care anymore. I don't play Pig3 crap anymore.

I was actually floored when I first was told this. Freeman always seemed like a cool dude, but I guess he isn't anymore.
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PostPosted: Thu Dec 08, 2011 4:43 am
My company (a franchise) went split wage back in July. They cried poor. Our POS's payroll module/system keeps track of when I am instore and dispatched under 2 different pay codes -- one at minimum wage (inside) the other at $5.25 per hour (out on delivery) (side note this 15- 20% "pay cut" will cost ME about $2000 a year in pay).

And this does not take into account the amount I lose/get screwed out being under compensated for the use of my vehicle (although my franchise did some study that says I am actually over compensated for the use of my vehicle)
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PostPosted: Thu Dec 08, 2011 9:31 pm
Racket_Man wrote:(although my franchise did some study that says I am actually over compensated for the use of my vehicle)


:evil: They consider any compensation more than what it costs to fuel a moped to be over compensation.
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PostPosted: Fri Dec 09, 2011 2:26 am
Racket_Man wrote:My company (a franchise) went split wage back in July. They cried poor. Our POS's payroll module/system keeps track of when I am instore and dispatched under 2 different pay codes -- one at minimum wage (inside) the other at $5.25 per hour (out on delivery) (side note this 15- 20% "pay cut" will cost ME about $2000 a year in pay).

And this does not take into account the amount I lose/get screwed out being under compensated for the use of my vehicle (although my franchise did some study that says I am actually over compensated for the use of my vehicle)


The way the driver explained it to me is that there is no split pay. They get $4.25 an hour no matter what.

I never thought that franchisee would ever be that scummy.

And it irritates me when they say that drivers are overcompensated. I bet they would not use their cars for less than IRS rate for delivery.
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PostPosted: Fri Dec 09, 2011 4:39 am
PD2 wrote:And it irritates me when they say that drivers are overcompensated. I bet they would not use their cars for less than IRS rate for delivery.


what is funny is that everyone above GM, like the area managers, brand manager, VP of area managers either get a company CC OR get a nice BRAND NEW leased luxury car
Last edited by gregster on Fri Dec 09, 2011 4:00 pm, edited 1 time in total.
Reason: edited to fix quote
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PostPosted: Sat Dec 10, 2011 12:21 pm
Racket_Man wrote:
PD2 wrote:And it irritates me when they say that drivers are overcompensated. I bet they would not use their cars for less than IRS rate for delivery.


what is funny is that everyone above GM, like the area managers, brand manager, VP of area managers either get a company CC OR get a nice BRAND NEW leased luxury car



Our's doesn't get a luxury car, but she does have a newish Toyota Corolla company car.
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PostPosted: Wed Jan 18, 2012 1:41 am
Applebee’s tip credit case to go to trial
U.S. Supreme Court declined to hear the wage-and-hour case, lower court ruling stands
January 17, 2012 | By Lisa Jennings

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A lawsuit challenging Applebee’s tip credit policies for servers and bartenders will go to trial later this year after the U.S. Supreme Court on Tuesday declined to hear an attempt to stop the case.

The Supreme Court’s move leaves intact a lower court’s ruling that will allow the Applebee’s tip-credit case to proceed to trial in September.

The wage-and-hour lawsuit was originally filed in 2006, and alleged that Applebee’s was underpaying servers and bartenders by applying a tip credit even for hours when employees did not perform tip-producing work, such as cleaning, taking inventory and setting tables.


In a statement, Applebee’s said, “We respect the Supreme Court’s decision today not to intervene at this time in this case and many others. While we do not comment on pending litigation, we will further defend our case in the lower court.”

The plaintiffs argued that employees should be paid the full minimum wage for time spent on non-tip-producing duties. They cited a Department of Labor interpretation of the U.S. Fair Labor Standards Act, which contends that employees who spend more than 20 percent of their time on non-tipped work are not entitled to a tip credit.

A federal court in Missouri had allowed the case to proceed to trial, but Applebee’s attempted to have the lower court’s decision overturned, arguing that non-tip-producing duties are a necessary part of a service job, and that the tip credit is allowed in certain states as long as combined pay reaches the federal minimum wage.

Labor attorney Anthony Zaller of Van Vleck Turner & Zaller in Los Angeles, who is unaffiliated with the Applebee’s case, said the Supreme Court’s decision not to hear the case does not necessarily reflect the merits of the argument either way.

“It could have been they were too busy,” he said.

The outcome of the Applebee’s case will also not impact employers in states were a tip credit is not allowed, including California.

Based in Kansas City, Mo., Applebee’s operates or franchises more than 2,000 restaurants globally. The casual-dining chain is a subsidiary of Glendale, Calif.-based DineEquity Inc.

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout


Read more: http://nrn.com/article/applebee%E2%80%9 ... z1jmkz7VEp

This is great news! This means that the 20% Rule was upheld!
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PostPosted: Wed Nov 21, 2012 2:14 am
There must be some movement on this lawsuit as my PH franchise is now strictly and I MEAN strictly enforcing the 20% rule now for our servers. All of the servers had to sign a "contract" of sorts (how legally binding it is I can not say as I am not a lawyer) stating that they MUST be performing server duties (ie. serving tables, cleaning tables, serving customers, checking customers, etc.) for a minimum of 85% of their scheuled shift. ALL sidework such as cleaning chores, rolling silverware, sweeping and moping, filling shakers, etc. for the front of the house is ONLY to be done during the last 30 minutes of their shift AND this work will be done under a production wage code ie. minimum wage.

The chatter that has filtered down is that some lawsuit was either filed or won (from the reaction I would say won or at the very least a settlement agreement was reached such as happened with NPC 6 months ago with their drivers).
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