TN Minimum Wage Underpayment of Waiters, Servers, and Other Tipped Employees

Mandatory tip pooling occurs when restaurants and other TN hospitality businesses require their tip-based hourly employees to pool a portion of their tips together. Similar to tipping out (the practice of waiters/waitresses and other tipped wage employees voluntarily contributing some of their tips to tipped or non-tipped support staff), tip pooling differs by business owners requiring tipped employees to contribute a portion of their tips to a pool. This pooled money is then redistributed among tipped employees according to some pre-arranged and understood system.

Tip pooling is not an illegal practice under federal or Tennessee minimum wage law as long as it follows certain rules. Unfortunately, employers in Tennessee do not always follow these minimum wage pay requirements. If tip pooling has violated Tennessee minimum wage law (see below) over a period of even a few weeks or if tip pooling has allowed a business owner, manager, or other employee to systematically keep moneys (wage or tips) due to you and your tipped coworkers, you may want to seek the services of our firm’s experienced TN wage and hour attorneys.

Tennessee, which as a state has no minimum wage statutes, follows the federal minimum wage standard. The base minimum wage for tipped employees has not changed since 1991, remaining $2.13 an hour. This is the amount your employer must pay if your average hourly tips for a shift exceed $5.12 an hour ($2.13 + $5.12 = $7.25, the TN minimum wage as of July 24, 2009).

If you receive less than $30 a month directly in tips from customers, your Tennessee employer cannot consider you a tipped employee.

Your Tennessee employer is required to make sure you earn at least minimum wage. Some underpaid minimum wage cases involving tip pooling result from employees’ tips being redistributed so that the tipped employee earns less than the hourly minimum wage ($7.25). More often, Tennessee tipping pool violations occur when an employer takes a portion of tipped employees’ gratuity earnings into a tip pool and redistributes these tip moneys illegally.

Tip Pooling Wage Violations

Under the federal Fair Labor Standards Act (FLSA), which establishes federal minimum wage law (again, TN has no minimum wage law statutes, so federal standards apply), it is illegal for an employer to take tips from an employee. Tips are considered the sole property of the tipped employee. While it seems that tip pooling would thereby be made illegal, this is not the case as long as contributions remain “fair and reasonable” (typically less than 15% of a shift’s tips), redistribution is consistent, and the tip pool is distributed entirely and only among commonly tipped employees.

Violations in tip pooling pay practices occur when some of the tip pool is kept by the employer or if a non-tipped employee takes a cut from the tip pool. Sometimes this is as blatant as an owner or manager taking money from the tip pool. (Last year, a California court awarded $105 million against Starbucks Corporation for allowing their shift supervisors to take a share of tips left for baristas.) Other times, employees who do not customarily receive tips and should not qualify as tipped employees (the tipped-less-than-$30-a-month requirement, see above) are paid a tipped employee’s $2.13 an hour and the difference made up by the tip pool’s redistribution. In other words, un-tipped workers are paid at the tipped employees’ expense.

The U.S. Wage and Hour Division has listed the following as employees who usually qualify as tip pool participants:

• wait-staff
• bellhops
• maîtres d’
• counter personnel serving customers
• bus employees
• service bartenders

The Wage and Hour Division suggests that dishwashers, cooks, kitchen helpers, janitors, and laundry-room attendants never qualify for tip-pooling arrangements, as well as managers or any individual (1) with the power to hire and fire employees, (2) supervises, plans schedules, or controls conditions of employment, (3) determines an employees’ pay, and (4) maintains employment records.

In addition to a manager or owner dipping into the tip pool, court decisions suggest that a tipping pool violates wage and hour law if this pool is not fully distributed or distributed inconsistently. Though not under any legal obligation to do so, it is smart for Tennessee employers with legitimate business practices using tipping pools to provide in writing how their employees’ tips will be credited toward their minimum wage and how tips will be shared among tipped employees. If your Tennessee employer refuses to explain the formula they use for distributing the tip pool, you may have reason to seek legal counsel to explore their pay practices for potential wage violations.

Minimum Wage Recovery for Tipped Hourly TN Workers

Tennessee employers are liable for their tipped employees’ underpaid wages. They are also responsible for illegal pay practices if they violated rules governing employee tips. Violations of minimum wage law can extend back up to three years.

Because tipping pool violations typically affect more than one employee, class actions are not uncommon. Damages include back pay and attorney’s fees and may include punitive payments in especially egregious cases of underpayment or tip violations.

For more legal information on TN minimum wage law, or to request the services of our firm’s experienced TN wage and hour attorneys, feel out our quick form or call our Nashville law offices at 615-353-0930.