New York employers might be intrigued by the U.S Court of Appeals for the Tenth Circuit's ruling against a server who sued her employer for keeping tips. The server argued that she was entitled to a portion of the tips paid by customers. However, a lower court ruled in favor of the employer, and the federal appellate court upheld this ruling.
The Fair Labor Standards Act requires that businesses pay their employees at least minimum wage plus 1.5 times their usual wage for any overtime hours worked. However, if the employee receives tips as part of their wage, the employer can pay the worker less than the minimum wage if the tips plus the wage add up to be more than or as much as the federal minimum wage.
In this case, the company paid the server more than the minimum wage. The FLSA does not stop employers from using tips as long as they are paying their employees minimum wage or higher. Furthermore, even though the Department of Labor has a rule that states that employers do not have a right to tips, the court acknowledged that the agency's rule does not supersede the FLSA. Therefore, the court found that the company did nothing illegal by keeping the tips.
If an employer is interested in reducing their minimum wage obligation, they might decide to seek information about wage and hour laws from a lawyer. The employer might want to learn more about how to claim credit for the tips their employees receive, and an attorney may be able to explain the statutory requirements with which the employer must comply to claim the credit.