According to a collective action suit, Texas Roadhouse enrolled its waitstaff into a tip credit plan that failed to meet the federal requirements and therefore owes its tipped employees the full minimum wage.
A collective action filed in Kentucky accuses Texas Roadhouse Management Corp. of using a “tip credit compensation plan” for its servers, waiters and bartenders that failed to meet the requirements of the Fair Labor Standards Act (FLSA).
Under a tip credit plan, employers like Texas Roadhouse can pay workers who normally receive tips an hourly rate that’s less than the minimum wage (but not below $2.13 an hour) so long as these workers earn the full minimum wage when their tips are factored in. The case says, however, that the FLSA requires that the employer meet the following conditions in order to pay employees the “tipped” minimum wage:
Employers must send a Section 203(m) notice informing employees of the company’s intent to use a tip credit plan;
employees must be informed of the amount of the “sub-minimum cash” they will be paid;
employees must be told the amount by which their wages will be decreased on account of the tip credit;
employees must keep all tips they collect (except those contributed to a tip pool); AND
the credit doesn’t apply to employees who don’t receive a Section 203(m) notice.
The case claims that Texas Roadhouse didn’t properly inform its employees about its tip credit policy and that, as a result, these workers should have been paid the full minimum wage. From the case:
“As a result of its failure to inform Plaintiff and those similarly situated of the said Section 203(m) ‘tip credit’ four-point notice requirements, Defendant has disqualified itself from eligibility for such a plan during all times material.”
In addition, the case alleges that Texas Roadhouse incentivized its managers to keep employees’ compensable hours within certain limits in order to cut costs, a practice known as “budgeted labor.” From the case:
“Defendant has had a centralized, unified and common plan, policy and practice of strictly enforcing restricted hours of compensable work per day and per week (budgeted labor) by providing incentives (bonuses) to managers to stay within or below such budgeted labor, even though such budgeted labor was/is inadequate to meet the operational demands and needs of its restaurants.”
As a result of this policy, the case claims, employees were forced and encouraged to perform “non-tipped” work while clocked in as “tipped employees” in violation of the FLSA.
The case also claims that, separate and apart from the notice requirements, the amount of time tipped employees spend on “side work” means they should be paid at the full minimum wage. Waiters and other tipped employees at Texas Roadhouse locations are allegedly forced to take out the trash, clean the facilities, restock condiments and perform other similar duties for more than 20% of their work time. The FLSA requires that companies pay the full minimum wage when tipped employees spend at least 20% of their time doing such “dual occupation” untipped side duties.
The suit requests the defendant pay unpaid minimum wages and liquidated damages to its putative class of all hourly paid tipped employees who have worked at Texas Roadhouse within the past two to three years.