Tenth Circuit Allows Employers to Pocket Tips
With minimum wage increases being a flashpoint on the labor law landscape, this case represents a blow to employees. A former employee of a catering company sued her employer under the Fair Labor Standards Act (FLSA) alleging it was obligated to pay her a share of tips paid by customers. The employee relied on a Labor Department (DOL) regulation stating that all tips are the property of the employee regardless of the employee’s regular wages. The FLSA is silent on the ownership of tips if the employer pays the full minimum wage not including tips. With the Circuits in conflict, the National Restaurant Association and others are seeking U.S. Supreme Court review. For the time being, the Tenth Circuit has sided with employers concluding the FLSA's tip-credit provision does not require an employer to pay tips to an employee who was paid an hourly rate above the full federal minimum wage. Even further, the DOL lacked authority to promulgate a regulation prohibiting employers from retaining tips.