Barrett, Karen

I have a question/comment about how tips and service charges are to be treated under the FLSA that I hope you will address in the regulation or in the preamble to any final rule. It concerns the following scenario: Assume a waitperson is employed at a restaurant, is paid $2.13 per hour, and regularly receives tips that are sufficient to bring that employee’s wages to $6.55 per hour. Also assume that the employer of that waitperson is covered under the FLSA on an enterprise basis. The employer has a policy, stated on the menu, that a service charge of 17% will be added to all checks involving parties of six people or more. During the course of a shift, that waitperson may concurrently serve tables of fewer than six customers and tables of six or more. During some periods of a shift, the only services the employee may render may be to tables of more than six customers (for which a service charge is paid to the employer). During other periods of that same shift, the only service that employee may render is to tables of less than six customers (for which the employee would receive a tip). How should an employer compute the waitperson’s wages during such shifts? May the employer still pay $2.13 per hour during periods of a shift when the customers will be charged a service charge and not be leaving a tip? Does it make a difference if the employer treats the service charge as a tip and give it to the employee who served the table of six? What if the employer keeps the service charge but conveys the tips to the employee? Thank you for your attention to these questions.