Applying Tip Credit to Non-Tipped Work May Violate Minimum Wage Requirement.

The U.S. Court of Appeals for the 10^thCircuit held that an employer may not take a tip credit for the time an employee spends performing non-tipped work, if such work exceeds 20% of the employee’s regular workweek.

Under the Fair Labor Standards Act, an employer may take a tip credit toward its minimum wage obligation for tipped employees equal to the difference between the required cash wage (at least $2.13) and the federal minimum wage ($7.25). In Romero v. Top Tier of Colorado LLC, the 10^th Circuit noted that the DOL has “recognize[d] that an employee may hold more than one job for the same employer, one which generates tips and one which does not, and that the employee is entitled to the full minimum wage rate while performing the job that does not generate tips.” It further noted that the DOL’s position is that “if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work…then the employer may not take the tip credit for the amount of time the employee spends performing those duties.” In the present case, a restaurant server also performed “non-tipped” tasks, such as brewing coffee or tea, rolling silverware, setting and wiping down tables, cutting and stocking fruit, stocking ice, taking out trash and sweeping floors. To the extent that those tasks exceeded 20% of her regular workweek, the employer could not take the tip credit towards those hours, but was responsible for the full minimum wage.

The tasks identified by the tipped worker in this case are very typical of the types of tasks that many (if not most) tipped workers perform in the course of their work. Thus, employers with tipped employees should be very careful to ensure that those employees’ nontipped duties does not exceed 20% of their time.