Georgia Employer Allowed to Keep Some of Employees’ Tips as Long as Employees Received Minimum Wage

A decision from a federal court in Atlanta this summer became the latest in a group to reject a recently created regulation by the U.S. Department of Labor declaring tips to be the property of employees in all circumstances, regardless of whether the tips were needed to raise the employee’s pay to a level that satisfied the minimum wage. The court decided that the plain language of the Fair Labor Standards Act is clear that employers are only required to hand over tip money when they pay a base wage below the applicable minimum wage.

The underlying dispute in the recent Georgia case centered around the compensation received by Deborah Malivuk, a valet for AmeriPark LLC. According to the employee, her agreement with AmeriPark, a parking and valet services company, called for her to receive an hourly wage plus tips. The employer did pay Malivuk an hourly wage and tips, but it did not pay her all of her tips. This led the valet to sue her employer, alleging that the employer’s diversion of a portion of the tips to itself violated the FLSA.

AmeriPark asked the trial court to dismiss the valet’s case. The employer argued that it was compliant with the FLSA, since the law only required it to pay tip money to employees if the base hourly wage it paid was below the federal minimum wage, and the tips were used to make up the difference between the base wage the employees received and the minimum wage required by the FLSA and its regulations, also known as a “tip credit.”

The court agreed with the employer and dismissed Malivuk’s case. In ruling that the FLSA did not give Malivuk an absolute right to receive all of her tip money, the court looked at other decisions from elsewhere in the country. Federal trial courts in New York, Illinois, and Utah, as well as the Fourth Circuit Court of Appeals, all recently ruled against employees who had launched similar actions. In each of those cases, the courts concluded that the FLSA does not establish any requirements on employers of tipped employees generally. Instead, the law only makes demands on those employers who use employees’ tip money in order to make up for a shortfall between the base hourly wage the employees received and the minimum wage. In the cases the court cited, as well as in Malivuk’s situation, the employers already paid their employees the minimum wage, even without the payment of any tips.

In reaching this ruling in favor of AmeriPark, the Georgia court became the latest to reject 29 CFR §531.52, a new Labor Department regulation that stated unequivocally that tips “are the property of the employee whether or not the employer” uses them to satisfy the minimum wage requirements. The courts concluded that the rule was not a permissible way of construing Section 203(m) of the FLSA. Section 203(m) instructed employers regarding the handling of tips in cases in which the employers used the tip credit. That did not mean that the law demanded anything of employers not utilizing a tip credit system. As the court explained, a “statute that provides that a person must do X in order to achieve Y does not mandate that a person must do X, period.”

While most courts (who have addressed the issue) so far agree that employers may keep tips as long as the employer is already paying a base wage that satisfies the federal minimum wage requirements, the permissibility of the practice remains somewhat up in the air. Whether you are deciding how to handle employees’ tips, or making other policy decisions about employee pay and the minimum wage, it is important to have knowledgeable employment counsel on your side to help you ensure that you are compliant with the law. The capable and experienced Georgia wage law attorneys at Parks, Chesin & Walbert have many years of helping both employers and employees understand their rights and obligations under the minimum wage law and are ready to help you ensure that your business (or your employer) is up to date and meeting all of the law’s requirements.

To speak with one of our lawyers about your case, call 404-873-8048.

More blog posts:

Eleventh Circuit Rules that Engineer Can’t Use Minimum Wage Law to Attack Employer’s Withholding of Final Pay, Atlanta Employment Attorneys Blog, July 13, 2016

Georgia Supreme Court Says Home Care Workers Covered by State’s Minimum Wage Law, Atlanta Employment Attorneys Blog, Dec. 4, 2015

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