A new appellate court decision could lead to the U.S. Supreme Court deciding once and for all what employers can and can’t do with the tips their workers earn.
A Lakewood-based catering company prevailed at the 10th Circuit when the court held that the caterer could lawfully retain the tips its employee earned as long as it was paying that employee at least minimum wage. The June 30 decision in Marlow v. The New Food Guy, Inc., which clashes with a 9th Circuit ruling in a similar case, is a strike against a U.S. Labor Department rule related to the Fair Labor Standards Act’s tip-credit provision.
The new ruling gives food service employers in the 10th Circuit’s six states more leeway in their tip-pooling and retention schemes, and it’s more likely than not to get the Supreme Court’s blessing, employment attorneys say.
Under the FLSA Section 203(m), or the law’s tip-credit provision, employers can choose to pay employees a lower minimum wage of $2.13 an hour as long as the employee still earns enough in tips to satisfy the standard $7.25-an-hour federal minimum wage. If the employee doesn’t earn enough in tips to reach minimum wage for each hour worked, the employer must make up the difference in additional wages. Employers in the food service and hospitality industries commonly use this practice in paying their “tipped employees,” which the FLSA defines as those who receive more than $30 a month in tips.