Joel Dillard & Associates

Representing Working People

Servers getting ripped off on tips

Pay problems are common in restaurants and bars, as employers try to cut corners in paying tipped employees. A recent case involving Coyote Ugly shows some of the more common issues.

Many restaurant managers and owners don't understand how the minimum wage and overtime laws apply to their customer servers. The federal minimum wage of $7.25 per hour - and overtime requirements - apply to servers. This means they have to track hours actually worked, and have to pay for every work week at least the minimum wage, as well as overtime for hours over 40. However, if the servers receive tips, the employer can take a tip credit to offset some of this amount. But there are detailed rules for this, and if they aren't followed the whole credit is invalid and the total $7.25 per hour is owed on top of all the tips. Here is how the tip credit is supposed to work:

If the employer breaks any of these rules the whole tip credit is invalid.

At Coyote Ugly, the bartenders and watresses had to share tips with security guards, and they argued that this was an invalid tip pool. The District Court disagreed. It found that in the unique environment at Coyote Ugly, security was part of the show, interacting with customers and entertaining them. This included barking in the street, flyering along with bartenders, wearing silly wigs and shouting quips to bring in customers like hot beer, cold women! They dance with customers and sometimes perform choreography with bartenders. For this reason, the Court found them validly included in the tip pool

But Coyote Ugly still lost a significant part of the lawsuit because the company had forced employees to work off the clock - for example, where bartenders spent time in photo-shoots for the swimsuit calendar without hourly pay. Most troubling of all, though, was the evidence that the company deliberatly falsified time and attendence records to avoid paying for all the time worked.

Read the Court's complete Coyote Ugly decision here.


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