An investigation by the U.S. Department of Labor’s Wage and Hour Division’s Jacksonville District Office found that Windy City Doc Holding LLC, doing business as Metro Diner, violated minimum wage and overtime provisions of the Fair Labor Standards Act. The Wage and Hour complaint identified three violations. First, Metro Diner made improper deductions from workers’ pay when it charged servers for their uniforms – that resulted in them earning less than the legally required federal minimum wage of $7.25 per hour in the weeks that they paid for those items. Second, the Diner’s practice of sharing the tips of tipped employees with non-tipped workers, such as dishwashers, also contributed to the minimum wage violations for affected servers. Third, the Diner also calculated overtime incorrectly when it based servers’ overtime rates on time and a half of their direct cash wages, rather than basing it on the full minimum wage, as required.
The maximum tip credit that an employer currently can claim under the FLSA is $5.12 per hour ($7.25 – $2.13). The following is a sample calculation for paying overtime to a tipped employee who receives $2.13 in direct cash wages. If a tipped employee works 45 hours in a workweek. The employee’s regular rate of pay is $7.25 per hour, the applicable minimum wage. Step 1: Use the employee’s regular rate of pay to calculate the overtime rate. $7.25 x 1.5 = $10.88 Step 2: Subtract the appropriate tip credit from the overtime rate to achieve the adjusted rate and multiply by the number of overtime hours worked that week. $10.88 – $5.12 = $5.76. Overtime is calculated $5.76 x 5 overtime hours = $28.80 overtime pay. Step 3: Add the employee’s straight pay plus the overtime pay to calculate total pay that week. 40 hours x $2.13 = $85.20 straight time; $85.20 straight time + $57.60 overtime = $142.80 under federal law.
Metro Diner settled the Wage and Hour complaint, agreed to comply with the FLSA and paid 59 employees a total of $154,179 in back wages. For more information on this topic, review the Wage and Hour Division’s Fact Sheet on Tipped Employees.