"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: Wed Jan 25, 2017 11:24 pm
AZPizzaGuy wrote:
RandomUser wrote:I work for a Papa John's in the Phoenix area and we have recently been bought out by a franchise.

When we were corporate, we were paid 'split pay' (8.05/5.05 since $3 is max tip credit in AZ).

As many of you may know, AZ voted to raise the minimum wage to $10.00 on January 1st and we were excited as we were expecting to be receiving $10/$7.

However, when I came to work on the 1st, I was informed that we were going to be paid a flat $7.25/hour and was required to sign a tip credit information sheet to that effect before I was allowed to clock in (basically, sign it or you don't work here anymore).


I also work for a Papa John's in Arizona and was confronted with the same issue. Rather than receiving $10 in-store and $7 on-the-road we are being paid a flat $7.25, and I know I spend some weeks well over 50% of my time on in-store duties.

I both emailed and spoken with the Industrial Commission of Arizona (Arizona's DOL) and been assured that if we are not being tipped during our in-store time that the store is in violation of the minimum wage laws by paying under $10 for those hours.



OK, here's the thing... your employer is allowed to decide which method they choose. They can choose "split-pay" or the straight "tip credit" method; each method has positives and negatives.

Split-Pay:
Employer Positive: It ensures that the employer is not violating the 20% rule
Employer Negative: The employer will likely end up paying more in direct wages since they are unable to steal wages customarily stolen by using straight tip credit.

Tip Credit:
Employer Positive: The employer is likely to pay less in direct wages, due to the fact that most employees are unaware of the 20% rule.
Employer Negative: When an employee educates themselves on the 20% rule, and acts upon that knowledge, the employer is likely to have a rough time explaining their actions. There is also the added cost of the employer defending their actions and the cost of of one large lump sum of money being owed to all employees.

AZPizzaGuy wrote:I can't shake the nagging feeling though that I'm either not explaining something to them properly or that we're missing something because I can't imagine the store going through with this without being sure that it's possible for them to do so. I guess we'll find out when some employees file a minimum wage complaint with the ICA.


You are likely explaining it properly, what is being lost is that there is no violation of the 20% rule until a claim has been made, and that claim has been substantiate. What you, and other in your franchise, need to do is determine whether or not a violation is likely occurring. What you need to know is how to determine if a violation is occurring.

1. 20% of 60 minutes is 12 minutes. If you are spending, on average, more than 12 minutes per hour "off the road" then it is likely a violation is occurring.
2. The violation has to occur over the entire pay period, not just on hour. So, you need to determine whether or not over the entire pay period the 20% rule is being violated. If you have a 2 week pay period and you're working 20 hours per week (40 hours per pay period) you would need to spend at least 480 minutes (8 hours) "off the road". That sounds like a lot of time, it might not be all that long. Here are tasks that are "off the road" time

A) Morning prep: cutting veggies and putting them in lexans, putting other toppings in lexans, prepping sauce (this would usually take me about 1 - 2 hours a day of straight "off the road" time)
B) Folding boxes
C) Working the make line: making pizzas instead of being out "on the road" delivering orders
D) Doing dishes
E) Closing duties: Dishes, sweep/desk scrub/mop
F) Standing around waiting for orders
G) Taking orders over the phone

All that time adds up. If you're no "on the road" you are "off the road".

Track your "off the road" time and see what you come up with. If it is more than 20%, the decide whether or not you want to file a complaint with your department of labor.
Don't expect others to fight your Battles

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PostPosted: Thu Jan 26, 2017 11:00 pm
Thanks for the replies!

elric92 wrote:1. 20% of 60 minutes is 12 minutes. If you are spending, on average, more than 12 minutes per hour "off the road" then it is likely a violation is occurring.
2. The violation has to occur over the entire pay period, not just on hour. So, you need to determine whether or not over the entire pay period the 20% rule is being violated. If you have a 2 week pay period and you're working 20 hours per week (40 hours per pay period) you would need to spend at least 480 minutes (8 hours) "off the road". That sounds like a lot of time, it might not be all that long. Here are tasks that are "off the road" time

A) Morning prep: cutting veggies and putting them in lexans, putting other toppings in lexans, prepping sauce (this would usually take me about 1 - 2 hours a day of straight "off the road" time)
B) Folding boxes
C) Working the make line: making pizzas instead of being out "on the road" delivering orders
D) Doing dishes
E) Closing duties: Dishes, sweep/desk scrub/mop
F) Standing around waiting for orders
G) Taking orders over the phone

All that time adds up. If you're no "on the road" you are "off the road".

Track your "off the road" time and see what you come up with. If it is more than 20%, the decide whether or not you want to file a complaint with your department of labor.


Papa John's system tracks your time on deliveries and time in store so we know exactly how long we've spent on each. As an example of a typical week, if I worked a total of 25 hours I would have spent 8 hours or more of it in-store performing the type of tasks you list. There are drivers that spend over half their time in-store doing these tasks while waiting on deliveries. So we're pretty darn sure that we're well over the 20% threshold for non-tipped work.

A number of us have been trying to learn as much as we can these last few weeks, searching online for info and speaking to the Labor Board. That's what led me to these forums in the first place and I saw the post by RandomUser and was glad to find someplace that might give more specific information.

One thing I've noticed as well, is that this payrate of flat $7.25 seems to be something going on with Papa John's stores statewide, all across Arizona and different franchises.

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PostPosted: Fri Jan 27, 2017 10:54 pm
AZPizzaGuy wrote:Thanks for the replies!

Papa John's system tracks your time on deliveries and time in store so we know exactly how long we've spent on each. As an example of a typical week, if I worked a total of 25 hours I would have spent 8 hours or more of it in-store performing the type of tasks you list. There are drivers that spend over half their time in-store doing these tasks while waiting on deliveries.


I am aware that the POS is able to track these totals. Are you having your end of shift Checkout Report printed at the end of your shifts? If you are not doing this, I highly suggest you do so. You will likely need to provide some excuse for requesting/requiring the printing of this document, depending on the animosity of your employer. I would suggest you just say "I need the Checkout Report for tax purposes." and leave it at that. If they refuse to provide the documents then just keep a log of it in a small notebook.

I don't know what it looks like on your version of the Checkout Report, since I never had to deal with tip credit and split pay, I always was paid the higher minimum wage.

AZPizzaGuy wrote:So we're pretty darn sure that we're well over the 20% threshold for non-tipped work.


I understand why you are saying the things you are saying; you just need to be aware of the legal distinctions. You are also doing a good job of directing the conversation as a "we" since that creates Protected Concerted Activity, a federal level protected class.

You need to be more than 'darn sure'; you need to be absolutely sure. Start printing out those Checkout Reports or documenting the "on the road"/"off the road" time.

Once you have that information you need to speak to an attorneys that specializes in wage & hour litigation. I do not know if Arizona has a fee shifting statute, that is something you need to ask a local attorney about. Also you need to ask an attorney if Arizona has punitive damages for wage theft/rebates of wages/kick backs.


AZPizzaGuy wrote:A number of us have been trying to learn as much as we can these last few weeks, searching online for info and speaking to the Labor Board. That's what led me to these forums in the first place and I saw the post by RandomUser and was glad to find someplace that might give more specific information.


I am glad that you found us and this post. Education is less than half the battle though. Being willing to put your job on the line to address these inequalities is the more difficult part.

AZPizzaGuy wrote:One thing I've noticed as well, is that this payrate of flat $7.25 seems to be something going on with Papa John's stores statewide, all across Arizona and different franchises.


Ok, so Arizona is not all that terrible of a state. They do allow tip credit but they also have a higher minimum wage (now)

Your employer could take as much as a $3.00 tip credit, which would mean a $7.00/hour pay rate. That your employer is paying you $7.25/hr is actually better than I would have expected. I know $0.25/hr does not seem like much but your employer could change that at any time, without notice or recourse.

If you do address this 20% issue, be aware that your employer may decide to decrease their direct wage to the minimum of $7.00/hr. Just letting you know possible outcomes.

Here's some additional information you need to obtain.

* Name of your franchise (this should be on your pay stub)
* Find out the name of the owner of the franchise (it may be an individual or individuals, or a larger corporation.
* A. Determine the number of locations within your franchise (take this number and multiply it by... B)
* B. Determine a best guess of the amount of delivery drivers per location (take this number and multiply it by A)

A * B = # of potential employees in the class

Take that number to an attorney and see if he gets rock hard or she starts slipping out her seat (because she's sopping wet).

If you cannot find an attorney to take your case, you always have the option of filing charges your local Department of Labor. If you are forced to go that route make a template of the charges and have multiple delivery drivers file the charges; this way it will hopefully cause your local Department of Labor to start a larger investigation, and not just an individual investigation.

I might have missed some advice, keep asking questions.
Don't expect others to fight your Battles

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PostPosted: Sat Jan 28, 2017 6:22 pm
elric92 wrote:I don't know what it looks like on your version of the Checkout Report, since I never had to deal with tip credit and split pay, I always was paid the higher minimum wage.


Checout Report 1-25-2017.jpg


This is what mine looks like
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PostPosted: Sat Jan 28, 2017 7:18 pm
tompace wrote:
elric92 wrote:I don't know what it looks like on your version of the Checkout Report, since I never had to deal with tip credit and split pay, I always was paid the higher minimum wage.


Checout Report 1-25-2017.jpg


This is what mine looks like

Thanks tompace. I've edited your photo to remove personally identifiable information. Also... that reimbursement.. OUCH... $0.17 per mile?

Anyways... AZPizzaGuy you need these Checkout Reports and then you need to do some math (for an entire pay period).

Total # Store Hours / Total # Hours = ??

If ?? is greater than 20% then a violation of the 20% rule has occurred.
Don't expect others to fight your Battles

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PostPosted: Sat Jan 28, 2017 8:43 pm
elric92 wrote:Also... that reimbursement.. OUCH... $0.17 per mile?


Oh, it's much worse...that's todays, though actual miles aren't correct there. It's averaging to less than 15 cents per mile.

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PostPosted: Sun Jan 29, 2017 4:22 am
tompace wrote:
elric92 wrote:Also... that reimbursement.. OUCH... $0.17 per mile?


Oh, it's much worse...that's todays, though actual miles aren't correct there. It's averaging to less than 15 cents per mile.


Refresh my memory...?? Someone is addressing that woefully inadequate mileage reimbursement, right?
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PostPosted: Mon Jan 30, 2017 12:24 pm
elric92 wrote:Anyways... AZPizzaGuy you need these Checkout Reports and then you need to do some math (for an entire pay period).

Total # Store Hours / Total # Hours = ??

If ?? is greater than 20% then a violation of the 20% rule has occurred.


It's probably my manner of speaking combined with avoiding being too specific about numbers and such but we've definitely been looking at both the clockout reports like tompace's and also just our paycheck stubs which list both in-store and on-road hours. There is no doubt that our in-store hours are significantly more than 20% of our total hours. Sometimes the ratio approaches the 70% in-store/30% on-road split you see on tompace's checkout report, sometimes it can be closer to 40% in-store/60% on-road.

Complaints have been filed with the labor board and we're just waiting to hear back from them now. As I mentioned though, one thing I find very odd is that this is being done across all Papa John's in Arizona and not just a specific franchise. And it's not being done by the other two big companies, they are paying the $10 for in-store work.

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PostPosted: Mon Jan 30, 2017 3:36 pm
AZPizzaGuy wrote:It's probably my manner of speaking combined with avoiding being too specific about numbers and such but we've definitely been looking at both the clockout reports like tompace's and also just our paycheck stubs which list both in-store and on-road hours. There is no doubt that our in-store hours are significantly more than 20% of our total hours. Sometimes the ratio approaches the 70% in-store/30% on-road split you see on tompace's checkout report, sometimes it can be closer to 40% in-store/60% on-road.

Complaints have been filed with the labor board and we're just waiting to hear back from them now. As I mentioned though, one thing I find very odd is that this is being done across all Papa John's in Arizona and not just a specific franchise. And it's not being done by the other two big companies, they are paying the $10 for in-store work.


I am glad that you have filed complaints/charges with your labor board. Personally I would have investigated the possibility of a civil suit, but that me. I would really appreciate any follow-up information you can provide during the investigation.

Whether every location in Arizona is doing this is somewhat irrelevant. What matters is that the locations that are controlled by the entity you work for is doing this; except as creating the impetus to cause you to advocate for change for those other similarly situated individuals.

Keep up the good work and let us know how it goes. And make sure to notate any strange actions taken against you. Employers tend to retaliate against employees that stand up for their legal rights.
Don't expect others to fight your Battles

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PostPosted: Mon Jan 30, 2017 10:03 pm
elric92 wrote:Someone is addressing that woefully inadequate mileage reimbursement, right?


I'm trying to. I contacted the pizzalawsuit.com guys and talked with a mike pontomick (sp?) who said they had already sued PJ recently and referred me to some guy out of new york who never returned my calls. I'm gonna try to get in touch with the McInnes guys who did my Domino's suit and see if they are interested.

This is a questionable suit, since I am paid a good bit over minimum wage in store. Logically to me, it seems like this would be able to be credited to their "debt" to me, but I've never gotten it verified by a lawyer...that's currently where I stand.
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