Is an oyster shucker who works in the “front of the house” allowed to share in the tip pool? Are a hotel restaurant and related members club joint employers for overtime purposes? The US Department of Labor (DOL) recently issued opinion letters on these topics and explained why the answer is “yes” to both questions under the Fair Labor Standards Act (FLSA). While the opinion letters apply only to the specific facts as presented, the analyses can serve as a roadmap for hospitality sector employers. Here’s what you need to know and the steps you can take to ensure compliance with the applicable rules.
First, What Are Opinion Letters?
Opinion letters are formal, written guidance from DOL officials explaining to the public how the agency would apply the law to a specific set of facts. While the letters are not binding on courts, they do serve as a powerful compliance tool and can be used as persuasive authority in defending against a legal claim. Anyone can request an opinion letter, and they’ve been used since the 1930s as a compliance lifeline for employers, unions, and workers alike. You can read more about the benefits here.
Sharing in the Tip Pool
The Question
The DOL’s Wage and Hour Division recently addressed a question involving an employer that takes a tip credit and whether its front-of-the-house oyster shuckers could share in the tip pool.
Here’s a quick refresher on the relevant rules:
- The FLSA allows employers to take a so-called “tip credit” and pay employees who traditionally receive a certain amount of tips – such as servers and bartenders – as little as $2.13 an hour, so long as they make at least the standard minimum wage ($7.25 an hour) when tips are factored in.
- If an employer takes a tip credit, it may require employees to pool tips, but only if the tip pool is limited to employees who customarily and regularly receive tips.
- There are other important tip-credit requirements, but the key analysis for this September 30 DOL opinion letter was whether the oyster shuckers were “employed in a customarily and regularly tipped occupation.”
The Verdict
The DOL concluded that the seafood restaurant’s oyster shuckers did qualify to share in the tip pool for the following reasons:
- They directly serviced the customers by going over the oyster offerings with them, making suggestions, and fielding questions about the different options.
- They also prepare the oysters in plain view of customers, similar to the front-of-house sushi chefs and other similar jobs the DOL has deemed to customarily and regularly receive tips.
- The oyster shuckers are similar to counter persons who serve customers, and whom WHD has long regarded as employees who customarily and regularly receive tips.
An oyster shucker may be a somewhat uncommon job position in the restaurant industry. But the DOL’s rationale for finding they may share in a tip pool supports including hosts/hostesses, a very common position. Hosts and hostesses are front of house employees who have a substantial amount of interaction with customers. They often field questions from customers, make dining suggestions, and perform other table attendance duties. Employers who already include them in tip pools should be encouraged by DOL’s analysis.
Joint Liability For Overtime Under the FLSA
The Question
In another September 30 opinion letter, the DOL was asked by a hostess whether her work hours at a hotel restaurant and a connected members club should be combined for overtime purposes. Here are the key facts as presented by the hostess to the DOL:
- She primarily works at the restaurant for $28 per hour and has been offered shifts at the members club for the same rate.
- The restaurant is located in a hotel. The members club is on the second floor of the restaurant, shares the same kitchen, offers mostly the same menu, and operates under a similar name.
- Employees, including staff and management, frequently perform work in the restaurant and members club in the same workweek.
- The hostess occasionally clocks in at the restaurant and is assigned work at the members club.
- Managers from the restaurant have to participate in disciplinary matters at the members club.
- Although the restaurant and the club claim to be separate businesses and might use different timekeeping and payroll systems, the hostess believes they have common ownership.
- She does not work more than 40 hours a week at either the restaurant or the members club individually, but when combined, her hours do exceed 40.
- The hostess was told she is not entitled to overtime premiums because the restaurant and the club are different businesses, but she believes they are joint employers and that she is entitled to overtime pay.
The Verdict
The DOL concluded that the hours she worked for each business should be combined and she should be paid overtime for hours worked beyond 40 in a workweek. Key factors that contributed to the DOL’s joint employer determination included:
- The companies’ physical proximity, common kitchen, and similar food and beverage menus.
- Shared ownership and periodic shared supervision, even if the two facilities have separate management teams.
- Employees could be “clocked in” at the restaurant and told to work in the members club, in addition to earning the same pay.
