Tipped Employee and Overtime Litigation Lawyers in South Carolina
Many people are unaware they are entitled to overtime compensation. Overtime laws are somewhat confusing for the weary and many employees have misconceptions about whether or not they are entitled to overtime. The law looks to the duties that an employee performs and the authority that an employee has – not his or her title or the fact that he or she may be misclassified by the employer as “exempt” or paid on a salary basis rather than on an hourly basis.
The Fair Labor Standards Act (“FLSA”) is a federal law that governs minimum wage and overtime issues in the United States. Some states have their own version of the FLSA governing overtime and minimum wage and such state-specific laws provide for greater employee protection in most cases than does the FLSA. South Carolina does not have a state law governing overtime pay, so the FLSA is the whole story for South Carolinians when it comes to overtime.
Some common myths and misconceptions about overtime pay, in no particular order, are:
Myth #1: You are not entitled to overtime if you are paid a salary.
Perhaps the biggest overtime myth is that salaried employees are not entitled to overtime pay. There are certain statutory exemptions for employees under the FLSA that do require an employee to be paid a salary in order to fall under the exemption, but salary is only one part of a multi-prong test in these instances. If the other criteria for an exemption are not met, then the fact that an employee is paid on a salary alone will not keep the employee from being entitled to overtime. The fact of the matter is that while there are many hourly employees who are entitled to overtime, there are also many salaried employees who are entitled to overtime as well. If you are paid a salary, you are still entitled to overtime unless you meet all of the requirements for one of the exemptions under the FLSA.
Myth #2: Compensatory time can be given in lieu of overtime pay
Unless you are employed by a public employer, such as the local, state or federal government, your employer cannot give you compensatory time in lieu of overtime pay. Private employers cannot even give their non-exempt employees a choice between overtime pay or compensatory time off under the FLSA.
Myth #3: Time spent travelling for work does not count towards hours worked for purposes of calculating overtime
While time spent commuting to and from work is not considered part of the hours worked in calculating overtime pay, employee travel that is part of the normal workday, such as travel time to and from job sites or client meetings, is compensable work time and does count towards the calculation of total hours worked for purposes of calculating overtime.
Myth #4: Tipped employees are not entitled to overtime pay
Although your employer is permitted to pay less than minimum wage (as low as $2.13 per hour) if you are a tipped employee (such as a waitress or bartender), your employer is nevertheless required to demonstrate that you are making at least minimum wage once your tips are added to the wages that your employer pays you. In reality, employers often fail to ensure that tipped employees are earning at least minimum wage after tips are taken into account.
Myth #5: Employees can give up their right to overtime pay
The FLSA does not allow an employee who is entitled to overtime pay to “give up” or waive his or her right to overtime pay by agreement with the employer. In other words, your employer is not off the hook for failing to pay you for overtime pay even if you and your employer entered into an agreement that you would not be entitled to overtime pay or that you would voluntarily waive your overtime pay. If your employer required you to enter into an agreement to this effect, then it is not valid by law and you may still be entitled to overtime pay.
Myth #6: You are not entitled to overtime unless your supervisor expressly authorizes it
Nearly all employees paid by the hour (and many employees who are paid a salary) are entitled to pay at one and a half times their normal rate of pay for all overtime hours worked. All work done above and beyond 40 hours in one week is eligible for overtime. If your supervisor directs you to go home from work instead of working overtime, then you should do so or you could be disciplined or even terminated. You are, however, entitled to overtime pay for all hours worked over forty per workweek regardless of whether your supervisor authorized you to work overtime or not.
Myth #7: Your employer can choose to pay you “straight time only” even if you work more than 40 hours a week
The FLSA requires that all employers pay their employees one and a half times the employee’s regular rate of pay for all hours worked in excess of 40 in any given workweek. Almost no exceptions to this overtime law apply if you are an hourly employee. This means that if you make $20 per hour, you should receive $30 per hour for all hours that you work in excess of forty hours per workweek.
Myth #8: You are not eligible for overtime for any work you did “off the clock”
All hours worked by an employee over 40 per week count towards overtime, no matter when they are performed. If your employer is asking you to work “off the clock” and either not paying you anything at all for that time worked “off the clock” or not counting that time worked “off the clock” towards your 40 hours per week in calculating your overtime pay, then you should speak with an overtime lawyer to determine whether you are entitled to overtime pay.
While these myths represent some of the more common misunderstandings in regards to overtime pay, there are many, many more. It pays for employees to understand exactly how overtime laws apply to their unique situations.
Tipped Employees and the Tip Credit
One of the more common areas where overtime and minimum wage law violations occur is in the restaurant, bar, and hospitality industries where many employees regularly receive tips from customers. For many employees, such as waitresses, waiters, busboys, bellhops, valets, and bartenders, tips are their primary source of income. Employers may pay tipped employees less than minimum wage and take what is known as a “tip credit,” which is a credit towards the employer’s obligation to pay an employee minimum wage, in determining what the total compensation would be for a tipped employee. Tipped employees are those who customarily and regularly receive more than $30 per month in tips. Employers electing to use the tip credit provision must be able to show that tipped employees receive at least the minimum wage when cash wages paid and the tip credit amount are combined. If an employee’s tips combined with the employer’s cash wage of $2.13 an hour do not equal at least the minimum hourly wage (currently $7.25 per hour), the employer must make up the difference. Very often, however, employers do not. Sometimes employers unintentionally violate tip laws. Other times, however, employers violate overtime laws on purpose in order to save money.
Notice of the Tip Credit
In order to claim the “tip credit,” an employer must specifically advise the employee, verbally or in writing, of the statutory tip credit before it is taken and allow the employee to retain the tips provided. Even if a tipped employee receives tips above and beyond minimum wage, if the employer failed to advise the employee of the statutory tip credit, then the employer can still be in violation of the FLSA. This is because, by taking the tip credit, the employer is asserting that the tipped employee is earning enough in tips to make up the difference between the federal minimum wage and the cash wages actually paid by the employer to the tipped employee.
An employer is required to provide the following information to a tipped employee before the employer may claim the tip credit:
(1) the amount of the cash wage the employer is paying a tipped employee, which must be at least $2.13 per hour;
(2) the additional amount claimed by the employer as a tip credit, which cannot exceed $5.12 (the difference between the minimum required cash wage of $2.13 and the current minimum wage of $7.25;
(3) that the tip credit claimed by the employer cannot exceed the amount of tips actually received by the tipped employee;
(4) that all tips received by the tipped employee are to be retained by the employee except for where a valid tip pooling arrangement is in place and is limited to employees who customarily and regularly receive tips; and
(5) that the tip credit will not apply to any tipped employee unless the employee has been informed of these tip credit provisions.
If an employer fails to inform a tipped employee of all of this information, then the employer cannot use the tip credit provisions and therefore must pay the tipped employee at least $7.25 per hour by law and allow the tipped employee to keep all tips received.
The 20% Rule and “Side Work”
While the FLSA permits employers to pay tipped employees less than minimum wage on account of the tips they earn, employers cannot claim a tip credit against the minimum wage for time spent working in a non-tipped occupation or on duties not related to their tipped work. For example, if an employee works as both a janitor and as a waiter for the same employer, the employer cannot take a tip credit for any of the hours the employee spends working as a janitor. The worker is a “tipped employee” only with respect to his employment as a waiter. But what about an employee who performs the work of both a tipped and a non-tipped occupation during the same shift? Can an employee still be a “tipped employee” if he or she is given work duties that are not tip-generating? The law holds that a tipped employee remains a “tipped employee” for pay purposes unless he spends more than twenty percent of his time performing non-tipped work. This common sense rule prevents employers from assigning – for example – substantial janitorial duties to its waiters and paying the subminimum “tipped employee rate” for work that will not result in any tips.
Tip pooling arrangements raise many questions for tipped employees and are quite often improperly implemented by employers. In many restaurants, tipped employees are required to give a portion of their tips to other restaurant staff members. The idea behind tip pooling arrangements is that many members of the restaurant staff contribute to the service of the restaurant’s customers and, accordingly, should also be allowed to share in the tips even if they don’t deal directly with the customers themselves.
Under a valid tip pooling agreement, tipped employees can only be required to share their tips with other employees who also regularly and customarily receive tips. Generally, if other employees included in the tip pool arrangement are either paid at least minimum wage or do not interact with customers, then the tip pool arrangement is not valid under the law. Courts have generally held that servers, hostesses, busboys, and service bartenders who are paid less than minimum wage can be included in tip pooling arrangements without invalidating the arrangement, while dishwashers, cooks, and janitors typically may not be included in tip pooling arrangements as they do not have sufficient interaction with customers. Tip pooling arrangements that include these types of employees without sufficient interaction with customers or that include employees who are paid minimum wage or greater are not valid. Tipped employees are also not required to share or pool tips with management.
While the FLSA is a federal law that requires employers to pay no less than minimum wage and to pay certain employees who work overtime at the overtime rate, South Carolina also has a state law, the Payment of Wages Act, which provides recourse for employees who are not paid their wages when they are due. Under the Payment of Wages Act, wages are defined rather broadly and the definition of wages includes bonuses and commissions in addition to their regular salary. The Payment of Wages Act provides for the recovery of treble damages in an amount equal to three times the amount of the wages due, in addition to attorney’s fees. Treble damages and attorney’s fees are only awarded under the Act if there exists no bona fide dispute over the unpaid wages or if the employer had no good faith reason for withholding the unpaid wages.