Ask The Lawyer Attorney and Counselor at Law-Waitress Entitled to Hourly Wage?

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QUESTION:  My daughter, a high-school senior, found a job working as a waitress. She’s very excited about the job, but she told me that she works for tips only — she does not receive an hourly wage. She said she would only get an hourly the amount she receives from all her tips is less than the hourly minimum wage. She’s been getting a lot of good tips, so far, but the arrangement seems weird.

ANSWER: The arrangement seems weird because it is weird — and also illegal. It sounds as if your daughter’s employer doesn’t quite understand the “tip credit” rule. Under both federal and state law, an employer is allowed to pay tipped employees an hourly rate that is less than that paid to other workers, as long as the tipped worker receives enough in tips to make up the difference between the lower rate and the minimum wage. If the tips aren’t enough to bring the average earned up to the minimum wage, the employer must cover the shortfall. Whoever is in charge at your daughter’s place of work has left out a central part of the equation: No matter what the employee receives in tips, the employer is on the hook to pay something.

The federal law, 29 USCA 203(m)(2)(A), sets the base rate for tipped employees at just $2.13 per hour — the rate in effect in August 1996. If Michigan used the federal minimum wage, your daughter would have to receive an average of at least $5.12 per hour in tips on top of the $2.13 per hour from employer to meet the federal $7.25 per hour minimum wage. (The minimum wage was last increased 13 years ago

Luckily for your daughter, Michigan is among the 30 states that require employers to pay more than the federal minimum. Currently, Michigan’s minimum wage is $9.87 per hour. The base wage for tipped employees is set at 38 percent of the minimum hourly wage, or $3.75 per hour, which is what your daughter should be receiving, in addition to her tips.

And, beginning in February 2023 — unless Michigan’s appellate courts have a say — the minimum wage will increase to $12.00 per hour, and then be adjusted for inflation every year after that. The base rate for tipped workers will increase to $9.60 (and possibly $10.80) before rising to $12 per hour by 2024. The increase in the minimum wage for tipped employees under a 2018 law will not affect their right to keep their tips.

Decisions in Michigan’s Court of Appeals or Supreme Court could stop these increases from going into effect. The 2018 law setting the $12 minimum and increasing the base wage for tipped employees was amended later that year. Under the amended law, which took effect in March 2019, the minimum wage will not rise to $12 per hour until 2020. In July, the process used to amend the law was ruled unconstitutional in an opinion by a judge in the Court of Claims. As a result, the amended law was null and void and the law was set to revert to the version originally enacted. Businesses were saved from having to suddenly hike the hourly rate when the Court of Claims judge issued a second order, giving businesses until February 19, 2023 to adjust to the new minimum wage.

The State of Michigan appealed the Court of Claims decision to Michigan’s Court of Appeals in July. The case may be heard as early as this month.

No matter what the minimum wage is in February, based on the facts you describe, your daughter is owed at least $3.75 per hour for every hour she has worked at the restaurant so far. Your daughter may want to contact an attorney or report the employer to the Department of Labor. If she brings a civil law suit, she can recover her lost wages plus costs and attorney’s fees. If she is fired as a result of asking for wages she should have been paid all along, she can add a claim of retaliation to the complaint and as for punitive damages.

If the restaurant is not paying its workers wages to which they are entitled by law, it should be reported — one way or another.

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By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
900 Wilshire Drive, Suite 104
Troy, MI 48084
(248) 970-0310
(248) 970-0311 facsimile
[email protected]