A tip on employee tips

Here's a tip for management — keep your hands off of your employees' tips.

A recent case filing by class of employees against a cannabis company accusing management of pilfering their tips. The Department of Labor and the Fair Labor Standards Act, however, are crystal clear: tips belong to the workers who earn them, period.

Service charges: A hidden trap for employees (and customers)

You just wrapped up a great meal at your favorite restaurant. The server drops off the check, and there's a surprise—your $100 tab is now $120, thanks to a $20 "service charge" added at the bottom. But here's the kicker: under the Fair Labor Standards Act (FLSA), that service charge isn't considered wages for your server. The restaurant can legally keep it all without sharing a dime.

The 80/20/30 Rule is official a zero

The Department of Labor's "80/20/30 Rule" for tipped employees is dead.

That Rule broke down the work of tipped employees into 3 different categories of work:

1. Tip-producing — Work that "provides service to customers for which tipped employees receive tips."

2. Directly supporting — Work "performed in preparation of or to otherwise assist tip-producing customer service work." Think rolling silverware, filling saltshakers, or cutting garnishes.

3. Not part of the tipped occupation — Work that is neither tip-producing nor directly supporting, such as cleaning bathrooms.

The risks in treating inside salespeople as "exempt"

If you employ inside salespeople, you need to pay attention to Su v. Webb Co. 

This case examined whether Webb, a wholesale distributor of plumbing equipment and fixtures, misclassified its 350 inside sales reps under the FLSA as exempt administrative employees, and therefore owed them unpaid overtime.

What does Project 2025 mean for employers? Wage and hour edition

In part 2 of my series on what Project 2025 means for employers and employment law, let's examine its proposed impact on wage and hour laws.

You'll find part 1, covering workplace discrimination laws, here.

Project 2025 proposes the following 5 key changes to the FLSA:

As seen on Reddit: payment for training time

As seen on the legaladvice subreddit:

"My company just told us about a new policy where any meeting or training that is held over the lunch hour where food will be provided is unpaid. Some of these lunch meetings are optional trainings, but some are mandatory department meetings. Is it legal for the company to deny pay for time spent at these meetings just because lunch is provided?"

Answer: It is not legal, and the time employees spend during those lunch meetings must be paid.

DOL cautions employers on the use of AI

"When used responsibly, AI has the potential to help improve compliance with the law. Without proper human supervision, however, these technologies can pose potential risks to workers … and may result in violations of the law…." 

Those are the words of the Department of Labor in its just published Field Assistance Bulletin, Artificial Intelligence and Automated Systems in the Workplace under the Fair Labor Standards Act and Other Federal Labor Standards.

The DOL highlights many potential legal pitfalls for employers that rely on AI to manage how their employees are paid and to track their attendance and leaves of absence.

It’s long past time to Ctrl-Alt-Del the FLSA

The Fair Labor Standard Act is not a good law because employers have zero hope in complying with it.

I know this fact is true because I just read Bradford v. Team Pizza. In that case, the 6th Circuit rejected both the employer's and the plaintiffs' interpretation of the FLSA and punted the case back to the district court to interpret the statute instead.

President Biden’s proposed 2025 federal budget offers a lot for employers to chew on

If you want to learn about a government's priorities, trace the money. 

President Biden's proposed federal budget for FY 2025 contains significant funding that would impact the workplace.

I ❤️ being a lawyer

I ❤️ being a lawyer. It presents something new and different each day, with each day offering an opportunity to learn.

For example, yesterday I read the 6th Circuit’s decision in Jones v. Producers Service Corp., which asked this question: "Under § 207(f) of the FLSA, when do an employee's job duties 'necessitate' irregular hours?"

When dealing with the FLSA, “administrative” may not mean what you think it means

It's really unfortunate that when Congress, in 1938, enacted the Fair Labor Standards Act it chose the label "administrative" for the law's broadest white-collar overtime exemption. That one word has caused more misunderstanding, confusion, litigation, and legal fees than any other word in the FLSA.

"Administrative" does not mean any employee who performs office or other non-manual work. Instead, it means any employee who earns a minimum salary of $684 per week AND who performs office or other non-manual work for which the employee's primary duty: (i) is directly related to the management or general business operations of the employer or the employer's customers; and (ii) includes the exercise of discretion and independent judgment with respect to matters of significance.

These issues were just front and center in Blackstone v. Dearborn Life Ins. Co.

Baning salary discussion bans

🛑 Employers, for the love of all that is holy, STOP BANNING EMPLOYEES FROM DISCUSSING THEIR WAGES!!! 🛑

A supervisor of subsidiary of Duke University is accused of doing just that, and now the employer is in hot water with the National Labor Relations Board.

According to the just-filed NLRB complaint, the supervisor allegedly instructed workers during a meeting "not to discuss their salaries." When one of those employees later raised "concerns about employees' salaries and equity in pay," they were fired.

Hiring undocumented workers

"Illegal immigrant co-worker got fired for asking about her check." 

That's the headline on Reddit.

Here's the rest of the post: 

"I have a co-worker who doesn't speak English at all so I've always communicated with her through google translate. A week ago, she asked me if I had gotten paid yet and told me that she hasn't seen a penny of her check despite working 50 hours a week since late November. I talked to my manager about it and my manager told me that she would send the check to her later. My co-worker texted me a few days ago and told me that she was fired for being an illegal immigrant and that she won't be paid because of it."

Discussing a couple of pay deductions for service-industry employees

Consider the following two policies, which restaurants and bars have implemented to save a few nickels against their tight margins:  

“Effective Jan. 1, we will begin implementing a tip refund for credit card processing fees for all gratuities left on a customer’s credit card; 2.5% will be deducted from your final check-out for each such gratuity paid.” 

 -and- 

“The full value of the check from which a patron flees the facility (‘dines and dashes’) will be deducted from the server’s paycheck.”  

Each of these policies is 100% legal under federal wage and hour laws. (Check your state laws, however, which may differ.) 

This is what it looks like to kick a business while it’s down

Last week, Corky & Lenny's, a deli that has been a local institution for the past 67 years, closed its doors. The owners cited staffing shortages and burnout as the primary causes.

Just three days later, one of its former employees filed a collective action lawsuit under the Fair Labor Standards Act for unpaid wages against the business and its owners. The named plaintiff, who worked as a server at the restaurant, claims that the business automatically deducted 30 minutes per shift for lunch for all non-exempt employees regardless of whether they took their lunch breaks or worked through them. She further claims that the business no longer had any method for employees to report days on which they did not take a lunch break, and otherwise ignored complaints of unpaid wages.

Do you understand the rules for paying employees for commuting time?

A technician claims her employer owes her pay for time spent traveling to the office to pick up materials on the way to the airport for a flight to visit a customer. According to the employee, the employer only begins paying at the departure time of the scheduled flight.

Is this employee correct? Must an employer pay for that travel time? Is she owed wages for time spent commuting to the airport (including the time spent traveling to the office to pick up the samples)? Or does the law permit the employer to start the pay clock when she boards the flight?

If you’re going to change an employee’s time sheet, make sure it’s an accurate change

🟩 LEGAL: Disciplining or firing a non-exempt employee who works unauthorized overtime.

🟥 ILLEGAL: Failing to pay a non-exempt employee for all hours worked, whether authorized or unauthorized.

🟩 LEGAL: Altering a non-exempt employee's time sheet so that it accurately reflects the actual number of hours worked.

🟥 ILLEGAL: Altering a non-exempt employee's time sheet to reflect a flat 40 hours per work week, no matter how many hours the employee actually worked.

A lawsuit recently filed against Liberty University will test each of these legal principles.

Kickbacks are bad

It's one thing to settle an unpaid overtime claim; it's another entirely to shake down your employees to repay the settlement funds to you.

That's exactly what the Department of Labor claimed Sparklean Laundry and Piper did.

Following a DOL investigation, Sparklean agreed to pay unpaid overtime back wages to its employees. Shortly thereafter, it began demanding kickbacks from its employees to compensate for the overtime settlement, submitted false receipts to showing that it paid the recovered wages, and threatened workers for exercising their rights under the Fair Labor Standards Act.

As a result, the DOL went to court and obtained a $281,870 judgment, which included $87,735 in back wages, $94,135 in liquidated damages, and an additional $100,000 in punitive damages.

Join me tomorrow: Tips on Tips webinar (free)

I spent my Saturday night at 8th Day Brewing Company watching my 17-year-old daughter, Norah, play a killer 3-hour set of music. When we sat down at our table, I was giddy to find the latest issue of The New Brewer, the bi-monthly trade magazine of the Brewers Assocation. That issue features my article on how to legally pay tipped employees.

Since access to the magazine and my article are for BA members only, you won't be able to read it if you're not a BA member (unless you happen to wander into a brewery that has it on display).

I can, however, offer you a great alternative. Tomorrow at 4 pm ET, I'm presenting Tips on Tips: How to Legally Pay Your Tipped Workers, a free webinar for the Craft Beer Professionals Fall Virtual Conference. You can watch live on the Craft Beer Professionals Facebook page or on its YouTube channel. 

The one thing your business can do right now to cut your potential FLSA liability in half

Q: What is the one thing that your business can do RIGHT NOW to cut your potential FLSA liability in half?

A: Hire an employment lawyer to conduct a wage and hour audit.

Case in point: Hendricks v. Total Quality Logistics.

After 13(!) years of litigation, a federal judge recently ruled that TQL violated the Fair Labor Standards Act and must pay unpaid overtime to thousands of misclassified employees.

The judge also ruled that TQL must pay statutory liquidated damages under the FLSA in an amount to the unpaid overtime because TQL did not establish that it acted in good faith in (mis)classifying its employees.