Recently on Twitter, I commented that revising the FLSA regulations won’t be quick or easy. My comment on Twitter should come with the added caveat: if they’re revised correctly. Merely increasing the minimum salary (the focus of the Secretary’s recent blog post) for the white collar exemption is not enough. Want some examples? DOL Secretary Perez referred to the Family Dollar case as an example of where the “primary duty” test revisions by the Bush administration swept up far more employees than he believes the FLSA intended. Need another? Tip credits.
In the past month, the Department of Labor and the Philly-area sports bar and restaurant chain Chickie’s and Pete’s agreed to a whopping $6.8 million settlement for back wages and liquidated damages to over 1,150 current and former employees. Among the allegations in the DOL’s lawsuit, Chickie’s and Pete’s had apparently required servers to contribute to an improperly designed “tip pool,” of which the restaurant then retained about 60 percent for the shift manager. Some servers were withdrawing cash or borrowing money to cover tips made on credit cards. Elsewhere, the DOL’s investigation found that servers and bartenders were paid only a flat rate of $15 per shift—an amount that frequently failed to cover even the lower minimum hourly wage for tipped workers of $2.13 per hour.
I could spend days writing about the tip credit/tip pool regulations because of the conflicts between state laws, federal laws, and case law. Complicating matters, the DOL amended the tip pooling rules in 2011 for the first time since the late 1960s. As we discussed back in 2011 when the DOL issued them, the regulations were as notable for what they didn’t include as what theydid. The DOL regulations also directly conflicted with appellate rulings and at least one federal court in Oregon declared them unlawful. Despite (because of?) the recent regulatory change, this is one of many areas where the FLSA could benefit from some simplification and clarity. The law remains unsettled and there are no easy cookie-cutter solutions or defenses. Given these facts, the Chickie’s and Pete’s settlement shouldn’t surprise you…but it should make you question whether your business is complying with the web of federal and state wage and hour laws (and whether you’ve taken steps to eliminate as much employee confusion and legal exposure as you can).