Evolution of Wage Issues in the Restaurant Industry

Last week, the U.S. Department of Labor announced a proposed rule for tip provisions of the Fair Labor Standards Act (FLSA) implementing provisions of the Consolidated Appropriations Act of 2018 (CAA). The proposal would also codify existing Wage and Hour Division (WHD) guidance into a rule. Compliance with the FLSA has long confounded restaurant industry employers (among others), and FLSA-related litigation continues to flood the courts. In particular, what employers do not know about the tip credit can expose them to liability including collective or class actions. The consequence of a violation is the potential to lose the tip credit making the employer liable for the difference between the tip credit minimum wage and federal minimum wage for each tipped employee with that amount liquidated (doubled) for a period of two years-three if the violation is found to be willful. 

The majority of restaurants implement both tip credits and tip-pooling arrangements. Although these…