Tennessee Minimum Wage and Tipping Practices Subject of New Series of Articles

January 18, 2010 by Jim Higgins

The Memphis News began a series today titled Tipping a Tricky Business that covers many of the wage and hour legal issues facing tipped wage employees, especially when they are required to share their tips.

Written by Fredric Koeppel, this first installment covers a variety of tip-related subjects that have appeared in previous Tennessee Workplace Law Blog, such as tip pooling and illegal paycheck/tip deductions.

If you are a tipped employee, tips are the bulk of your paycheck. A tipped employee with 10 years with the company often receives the same on his or her paycheck as someone who just started. As Koeppel’s piece points out, “Some diners tip well and some don’t[…] Some tip on the amount before taxes and some on the after-tax total.” Furthermore, some restaurants charge their wait staff for tips paid on a credit card as a means of recovering the charges the restaurant must pay for credit card transactions.

The article does a fine job of stressing what anyone who’s lived off tips knows firsthand: Waiters work hard. Nor is all their work with the tipping customer. Sidework in its various forms – polishing glasses, cutting lemonades, setting tables, prepping, cleaning – cuts into a server’s time on the floor, which decreases the ratio of tips to hours worked and, ultimately, take-home pay.

Although the federal minimum wage rose last year to $7.25 per hour, the federal minimum hourly wage for tipped employees remains $2.13, the same rate since 1991. But what not all foodservers and other tipped employees realize is that their $2.13 per hour plus tips must equal the $7.25 an hour, or the restaurant is legally obligated to pay the tipped employee the difference to make sure he or she makes the increased minimum wage.

Apparently not an American invention, according to the Memphis News article, tipping began with European visitors to the States after the Civil War. Seen initially as elitist, by the Roaring Twenties tipping at restaurants had become an institution--and by the time of the Fair Labor Standards Act (FLSA), this means of paying employees less by working for gratuity had become a legally recognized work practice.

FLSA provides a variety of protections; many can be found in previous Tennessee Law Blog entries and our Nashville law firm’s employment pages. These include laws protecting against tip theft. Policies of tipping out and tip pooling can lead to illegal theft of tips, as can charging a worker for equipment or uniforms. Legally, no owner or manager can compel a tipped employee to “cover the cost of doing business.”