Atlanta Employment Attorneys Blog
Business owners face many business risks. One that is regrettably on the rise in the food service industry is the “dine and dash,” where customers consume food or drinks, and then leave without paying. The rise of this practice raises some important questions about who pays for dine-and-dashers’ purchases and when (or if) an employer can deduct the cost of a customer walkout from a tipped worker’s wages. As with any minimum wage or overtime compensation question, obtaining knowledgeable advice to ensure complete legal compliance is crucial. An experienced Atlanta wage and hour lawyer can give you the information you need to understand fully your rights and obligations.
While viral social media content and the FLSA do not regularly overlap, a recent TikTok video provides a real-life example of this issue of customer walkouts and deductions from a tipped worker’s income.
The September 8 video, released by a golf course beverage cart attendant, warned other service industry employees to be cautious when handing a customer a wireless device (such as an iPad or Android tablet) to complete paying for their purchases. Allegedly, a customer used trickery to dodge paying a $76 bill, a deceit the attendant did not discover until after the group was “long gone.”
Ultimately, the attendant paid the sum out of her own tips. This outcome raises the question: is it legal to make a tipped worker pay for certain losses – such as customer walk-outs, breakage, or cash register shortages – from the tips he/she received?
The Role the Minimum Wage Tip Credit Plays
As is true in many situations, the answer is… it depends. If the employer avails itself of the “tip credit” allowance of Section 3(m)(2)(A) of the FLSA, the answer is a broad “no.” If an employer takes the tip credit, the law considers it to have paid the worker only the minimum wage… and this before any potential deductions for things like walkouts or cash drawer shortages. Any deductions for losses would inherently drop the worker’s wages below the mandatory minimum and constitute a violation of the FLSA.
An employer that does not take the tip credit may deduct for losses like walkouts… potentially. If the deductions are so large that they leave the worker’s earnings below the minimum wage, that is a violation. If not, then it is permissible.
Deducting for losses like walkouts, breakage, and cash register shortages is not the only way employers can run afoul of this part of the minimum wage law. As the federal Wage and Hour Division pointed out, employers have used an array of bases to reduce workers’ wages, from the cost of uniforms or other essential business supplies (like a security guard’s weapon,) to uniform cleaning/mending/pressing expenses, to the price of repairing an employer-owned vehicle that the worker crashed. All of these categories require the same analysis. If the employer uses the tip credit, these deductions are impermissible because they would necessarily result in the worker receiving an illegally low wage. When the tip credit is not a factor, deductions are only allowable if they do not result in the worker’s post-deduction wages falling below the mandatory minimum the FLSA demands.
The question of an employer deducting certain business costs from tipped workers’ pay is nuanced and potentially complex. Many minimum wage and unpaid overtime issues involving tipped workers are similarly complicated. To ensure that your business (or your employer’s business) is meeting all the law’s requirements, get in touch with the skilled Atlanta wage and hour attorneys at the law firm of Parks, Chesin & Walbert. Our team has the knowledge and experience you need to avoid costly disputes and make certain all workers receive what the law requires.