What are the common ways that employers break minimum wage laws?

Unlawful Tip Pools

If you work in the food service industry, you probably know what a “tip pool” is. For everyone else, a tip pool is when tipped employees (like bartenders, waiters, waitresses, servers, bussers, and food runners) share or “pool” the tips they receive from customers.

Many consumers are surprised to learn that the tips they give to servers or bartenders might not actually go to the people providing the customer with excellent service. Instead, many businesses require employees who directly receive tips (like a bartender or waitress) to share a set percentage of their tips or total sales with other employees.

Federal law requires employers to follow very strict guidelines in handling mandatory tip pools. The failure to follow any one of the rules makes the entire tip pool illegal. The result? For the entire time period that the employer did not follow the rules, the employer loses the ability to pay tipped minimum wages.

This means that the employer owes back wages to all of its tipped employees equal to the difference between full minimum wage and what the employer actually paid (usually tipped minimum wage). Tips do not count or offset this amount. In addition, the employer is almost always liable for additional “liquidated” damages and attorney’s fees and expenses.

The employees subject to an illegal tip pool can end up receiving a significant amount of money if they successfully bring an illegal tip pool claim under federal and Ohio law. For example, if an Ohio waiter worked 40 hours a week for two years, was paid tipped minimum wage, and was subject to an illegal tip pool, the employee would be owed about $8,320 in unpaid wages. With the additional damages and liquidated damages under Ohio and federal law, that amount could be increased to around $33,000 plus reimbursement of the employee’s attorney’s fees and costs.

You can learn more about the rules governing tip pools here.

“Off-the-clock” Work

One of the most common minimum wage violations occurs when an employer requires an employee to work “off-the-clock.” This practice breaks the most basic minimum wage rule- if you work, you must be paid at least minimum wage for that work. Employers cannot ask you to work “off-the-clock” or even permit you to do it (even if the employer never asked you to do it).

Examples of “off-the-clock” work include:

  • Asking an employee to perform work before a shift, (“Before you come in, can you run to the bank and get $1s for us?”)
  • Expecting an employee to do certain kinds of preparatory work before their shift. (“Before you clock in, please get these tools ready and put on your safety gear” or “Before you clock in, please boot up your computer and log into the system.”)
  • Asking an employee to perform some work during an unpaid lunch break. (“Make sure you answer the phone if it rings while you are on break.”
  • Asking an employee to perform work after a shift. (“Go ahead and clock out because your shift is over, then, please finish sweeping the floors and counting your register.”)

It is important to remember that you can’t agree to work for less than minimum wage. Even if you signed a contract saying “I agree to work off-the-clock” or “I agree to be paid $3.00/hour,” it does not matter. Wage and hour laws do not permit you to make that choice and do not permit your employer to enforce that choice against you.

Withheld and Late Paychecks

Employers occasionally withhold paychecks from employees. Typically, the paycheck is held for “ransom” and promised only on the condition that the employee does some final service for the employer (like giving two-weeks notice, returning keys or papers, or satisfactorily completing a shift).

The law is clear on this issue: Employees must be paid their paycheck. Employers cannot make a last paycheck (or any paycheck) conditional on anything other than the employee’s work hours.

Sometimes employers pay employees late. Maybe there is a cash flow problem, maybe the employer didn’t submit its payroll information on time, or maybe the employer withheld a paycheck but then decided to pay it.

A late paycheck is like not being paid at all for that time period. This means that an employee can claim additional damages above and beyond the amount owed by the paycheck (and his or her attorney’s fees incurred in recovering the damages).

Commissions-Only

Sometimes employees work for “commissions-only.” In other words, the employee only gets paid based on making sales or some other metric (like being paid per job completed or per delivery made). In weeks where the employee either does not make enough sales or works a lot of hours, the employee might be paid less than minimum wage (sometimes nothing at all).

Under federal law, whether a commissioned salesperson must be paid at least minimum wage depends on a number of factors, including whether the employee is an “outside” or “inside” salesperson. In Ohio, the Ohio Supreme Court is currently deciding a case that will tell us whether outside salespeople are entitled to minimum wage.

Am I entitled to minimum wage?

The quick answer is that if you are an employee, then you are probably entitled to minimum wage. Because there are a number of complicated exceptions, double-check with an experienced wage and hour lawyer.

Where can I go for help with my minimum wage issue? The wage and hour law team at Markovits, Stock & DeMarco is equipped to assist both employees and employers with minimum wage issues.

Click here to Learn more about the law firm of Markovits, Stock & DeMarco or call (614) 604-8759 to speak to a lawyer.