The federal government recently enacted an amendment to the Fair Labor Standards Act (FLSA) known as the Tip Income Protection Act of 2018. This new law is a great protection for service industry workers, such as waiters, valets, and other employees who regularly receive tips. This amendment to the FLSA was included in the Consolidated Appropriations Act, 2018 (Act), Pub. L. No. 115-141, Div. S., Tit. XII, § 1201.

While the FLSA wage provisions generally protect only minimum and overtime wages, this recent amendment protects wages paid to employees as tips by the employer’s customers.

The Protection Act

The Tip Income Protection Act of 2018 prohibits employers, managers, and supervisors from keeping any portion of an employee’s tips (other than customary charges by credit card companies to the employer for tips customers pay by credit card). See U.S. Department of Labor Bulletin.

If an employer, manager, or supervisor improperly keeps some or all of the employee’s tips, then the employee may recover twice the amount of the improperly withheld tips plus mandatory legal fees and costs.

Example

For example, if an employer keep tips that customers pay by credit card and only allows employees to keep cash tips, then the Tip Income Protection Act of 2018 has been violated. If the amount of improperly withheld credit card tips to the employee were $5,000 in a given time period, then the employee would be owed $5,000 in back tips, an additional $5,000 for liquidated damages (the statutory penalty imposed for withholding the tips), and mandatory legal fees and costs.

Furthermore, if the employer allows a manager or supervisor to be paid any of the employee tips, then the FLSA has been violated. The FLSA’s executive exemption test is currently used to determine if a person is a “manager” or “supervisor” under the Tip Income Protection Act of 2018. The executive exemption requires such a manager or supervisor to: (1) be paid on a salary basis of at least $455 per week, (2) have a primary job duty of management of the company or a department or subdivision of the company (e.g. a store manager), (3) customarily and regularly direct the work of two or more other employees, and (4) hire and fire employees, or make recommendations on hiring, firing, or change of status that are given significant consideration by other employees who actually make the decision.

So, assuming a store manager who meets the FLSA executive exemption test above is allowed by the employer to keep 20% of the store employee tips, then those employees’ wage rights have been violated and the employer owes them twice the amount of those tips improperly given to the store manager plus legal fees and costs.

What can you do?

The employment law attorneys at Baron & Budd have represented thousands of employees throughout the United States. The attorneys at Baron & Budd are known and respected for their results and experience in the field of employment law. If you think that your employer might not be paying you all wages you are owed, including tips, overtime wages, or minimum wages, please contact us at 866-238-4143 or complete our contact form for a free and confidential case evaluation. There is no out of pocket cost to you for a consultation to learn more about your state or federal employment protections.