Domino's Pizza Sued by New York Attorney General

 On May 24, New York Attorney General Eric Schneiderman filed a lawsuit against Domino’s Pizza for wage theft and other wage violations against their delivery drivers. The lawsuit is also against three franchisees that own ten stores in the New York Area.

The complaint alleges that Domino’s was underpaying its delivery drivers below even minimum wage, and that they were not being properly paid overtime, either. According to the complaint, Domino’s knew about certain issues in their payroll system, PULSE, which underreported time and tips for the workers. However, these issues were not reported to the franchisees, which resulted in workers being underpaid.

Other allegations include requiring their drivers to pay out-of-pocket for their own job expenses, such as paying for their own gas or paying for bicycle maintenance, and improperly determining tip credit – the franchisee owners never checked if their drivers made enough in tips to justify a tip wage of 2.13/hour, which caused many of the drivers to work for below the federal minimum wage.

Does this situation sound familiar? If you’re experiencing similar actions from your employers, let us know by giving us a call at 615-250-2000! 

Tipped employees

Tipped Employees Under the Fair Labor Standards Act (FLSA)

Tipped employees are those who customarily and regularly receive more than $30 a month in tips. Tips actually received by tipped employees may be counted as wages for purposes of the FLSA, but the employer must pay not less than $2.13 an hour in direct wages.

Requirements

If an employer elects to use the tip credit provision the employer must:
  1. Inform each tipped employee about the tip credit allowance (including amount to be credited) before the credit is utilized.
  2. Be able to show that the employee receives at least the minimum wage when direct wages and the tip credit allowance are combined.
  3. Allow the tipped employee to retain all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent the employee participates in a valid tip pooling arrangement.
If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the minimum hourly wage ($5.15 an hour) the employer must make up the difference.

Dual Jobs
: When an employee is employed concurrently in both a tipped and a non-tipped occupation, the tip credit is available only for the hours spent in the tipped occupation. The Act permits an employer to take the tip credit for time spent in duties related to the tipped occupation, even though such duties are not by themselves directed toward producing tips, provided such duties are incidental to the regular duties and are generally assigned to such occupations. Where tipped employees are routinely assigned to maintenance, or where tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.

Retention of Tips: The law forbids any arrangement between the employer and the tipped employee whereby any part of the tip received becomes the property of the employer. A tip is the sole property of the tipped employee. Where an employer does not strictly observe the tip credit provisions of the Act, no tip credit may be claimed and the employees are entitled to receive the full cash minimum wage, in addition to retaining tips they may\should have received.

Service Charges
: A compulsory charge for service, for example, 15 percent of the bill, is not a tip. Such charges are part of the employer’s gross receipts. Where service charges are imposed and the employee receives no tips, the employer must pay the entire minimum wage and overtime required by the Act.

Tip Pooling: The requirement that an employee must retain all tips does not preclude tip splitting or pooling arrangements among employees who customarily and regularly receive tips, such as waiters, waitresses, bellhops, counter personnel (who serve customers), busboys/girls and service bartenders. Tipped employees may not be required to share their tips with employees who have not customarily and regularly participated in tip pooling arrangements, such as dishwashers, cooks, chefs, and janitors. Only those tips that are in excess of tips used for the tip credit may be taken for a pool. Tipped employees cannot be required to contribute a greater percentage of their tips than is customary and reasonable.

Credit Cards: Where tips are charged on a credit card and the employer must pay the credit card company a percentage on each sale, then the employer may pay the employee the tip, less that percentage. This charge on the tip may not reduce the employee's wage below the required minimum wage. The amount due the employee must be paid no later than the regular payday and may not be held while the employer is awaiting reimbursement from the credit card company.

Typical Problems

Minimum Wage Problems: Employee does not qualify as a “tipped employee”, tips are not sufficient to make up difference between employer's direct wage obligation and the minimum wage; employee receives tips only -- so the full minimum wage is owed; illegal deductions for walk-outs, breakages and cash register shortages; and invalid tip pools.

Overtime Problems: Failure to pay overtime on the full minimum wage; failure to pay overtime on the regular rate including all service charges, commissions, bonuses and other remuneration.
Off the Clock: Time spent doing work not requested by the employer, but still allowed, is generally hours worked, since the employer knows or has reason to believe that the employees are continuing to work and the employer is benefiting from the work being done. This time is commonly referred to as “working off the clock.”

Tipped employees who earn $2.13/hour in wages while their employer applies the tip credit to the remaining minimum wage amount are considered to be minimum wage employees.  Any off the clock work by these employees would reduce their wages to below minimum wage and would therefore be a failure by the employer to pay minimum wage.  

Uniforms: The FLSA does not allow uniforms, or other items which are considered to be primarily for the benefit or convenience of the employer, to be included as wages. Thus, an employer may not take credit for such items in meeting his/her obligations toward paying the minimum wage or overtime.

The FLSA does not require that employees wear uniforms. However, if the wearing of a uniform is required by some other law, the nature of a business, or by an employer, the cost and maintenance of the uniform is considered to be a business expense of the employer. If the employer requires the employee to bear the cost, it may not reduce the employee's wage below the minimum wage or cut into overtime compensation required by the Act.

For example, if an employee who is subject to the statutory minimum wage of $5.15 an hour is paid an hourly wage of $5.15, the employer may not make any deduction from the employee's wages for the cost of the uniform nor may the employer require the employee to purchase the uniform on his/her own. However, if the employee were paid $5.50 an hour and worked 30 hours in the workweek, the maximum amount the employer could legally deduct from the employee's wages would be $10.50 ($.35 X 30 hours).

The employer may prorate deductions for the cost of the uniform over a period of paydays provided the prorated deductions do not reduce the employee's wages below the required minimum wage or overtime compensation in any workweek.