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FLSA: Mandatory "service charge"
is not a "tip," so can
offset wages |
Compere v. Nusret Miami
(11th Cir 03/18/2022)
http://case.lawmemo.com/11/compere.pdf
Sent to Custom
Alerts™ subscribers on 03/21/2022
The 11th Circuit held
that a restaurant's mandatory "service charge" is not a "tip" and
thus can be used to offset restaurant's wage obligations under the
FLSA.
Nusret Miami, LLC, a restaurant in Miami, has added a
mandatory 18% "service charge" to customers' bills since its
opening.
It collected the money from this charge and
redistributed it to "certain employees on a pro rata basis" to
cover minimum and overtime wage obligations.
The
plaintiffs in this case – a group of employees at Nusret –
challenged Nusret's compensation scheme under the FLSA by arguing
that Nusret paid them less than the required federal minimum and
overtime wages and "forced them to participate in an illegal tip
pool with non-tipped employees."
The primary issue in this
case was whether Nusret's mandatory 18% "service charge" is a tip
under the FLSA. If the charge was found to be a tip, the FLSA
would not allow Nusret to use that money to satisfy its minimum
and overtime wage obligations.
But if the charge was not
found to be a tip, Nusret would be allowed to use it to meet those
obligations.
The trial court found that the charge is a
"service charge" and granted summary judgment in Nusret's favor.
On appeal, the 11th Circuit agreed with the trial's court
decision.
The court found that the service charge was not
a tip and thus could be used to "offset Nusret's wage obligations
under the FLSA."
The FLSA defines neither “tip” nor
“service charge.” But as noted in Department of Labor regulations,
the critical feature of a “tip” is that “[w]hether a tip is to be
given, and its amount, are matters determined solely by the
customer.”
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