The U.S. Court of Appeals for the 8th Circuit recently issued a decision that has significant ramifications for employers making use of the tip-credit provisions of the Fair Labor Standards Act (FLSA). The decision mandates that employers who use the FLSA tip credit provisions to pay tipped employees should pay close attention to the amount of time those employees spend performing non-tip-producing work. Fast v. Applebee's International, Inc.

How It All Began

This case resulted from a lawsuit filed by servers and bartenders against Applebee's claiming that they were not properly paid for all the work they performed. Under the FLSA employers are permitted to pay employees in a tipped occupation a cash wage of $2.13 per hour so long as employees receive tips sufficient to ensure that they receive at least the minimum wage (currently $7.25) for all hours worked in a workweek.

This action was filed because the employees (who admitted they received tips that resulted in their wages at least equaling the federal minimum wage for all hours worked) claimed that Applebee's required them to perform non-tip-producing activities while still paying them only the tip-credit wage of $2.13. They argued they should have been paid the full minimum wage ($7.25 instead of $2.13) when they were engaged in non tip-producing activities.