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Tip Distribution Ruled as Violation of Labor Standards

In a ruling on February 24, the United States Court of Appeals for the Ninth Circuit determined that the distribution of tips is a violation of labor standards. It was ruled that employers are no longer able to collect service employees’ tips to share with others on the staff, even if the service employee is paid minimum wage.

Prior to this ruling, employers were able to use the tips service employees receive to apply as a tip credit to be a part of the minimum wage. The Fair Labor Standards Act was silent regarding issues of tip pooling when the initial Department of Labor rule that limited tip pooling was upheld in 2011. This rule only impacted businesses engaging in tip crediting.

The following statement was made with the ruling:

[W]e conclude that Congress has not addressed the question at issue because section 203(m) is silent as to the tip pooling practices of employers who do not take a tip credit. There is no convincing evidence that Congress's silence, in this context, means anything other than a refusal to tie the agency's hands. In exercising its discretion to regulate, the DOL promulgated a rule that is consistent with the FLSA's language, legislative history, and purpose.

A survey conducted by the Chicago Booth School of Business Initiative on Global Markets resulted in 34% of the experts who participated felt that a minimum wage increase would make it more difficult for certain, lower wage workers to get a job, 32% of them disagreed, and 24% were unsure.

At Bailey Cowan Heckaman PLLC, we believe that employees should have their rights protected. We are aware of the various laws regarding employees and employers including wage and hour disputesFair Labor Standards Act, and more. We know tip pooling and what this ruling means for service employees.

If you believe that you have an employment law issue and you would like to discuss your potential claim with a skilled attorney, call Bailey Cowan Heckaman PLLC today. Our firm is dedicated to helping our clients recover wages that were wrongfully withheld from them.

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