Judge Rules Fresco by Scotto Violated Tip Credit Rules for Waiters

The tip credit requirements of the Fair Labor Standard’s Act were violated by Fresco by Scotto Restaurant according to Analisa Torres, a federal court judge in New York. An employer may not take a tip credit under the FLSA unless the employee has been informed of the FLSA’s tip credit provision. Judge Torres noted that “this requirement is strictly construed, and must be satisfied even if the employee received tips at least equivalent to the minimum wage. The employer bears the burden of showing that it satisfied the FLSA’s notice requirement by, for example, providing the employee with a copy of § 203 (m) and informing the employee that her tips will be used as a credit against the minimum wage as permitted by law. If the employer cannot show that it has informed the employee that tips are being credited against her wages, then no tip credit can be taken and the employer is liable for the full minimum-wage.” Applying these principles, the Court found that Fresco by Scotto was not entitled to take a tip credit against the servers’ wages under the FLSA prior to July 2012. To begin with, the waiters and bussers were not orally informed about their compensation generally or the tip credit specifically when they began working at Fresco. Moreover, the written notices that the restaurant provided beginning in March 2011 did not adequately explain the tip credit provision because the notices were in English only. Fresco offered no evidence that the servers – all of whom testified at trial in Spanish with the assistance of an interpreter – were sufficiently literate in English to be informed by the notices. Finally, the Court rejected the restaurant’s argument that the government posters displayed at Fresco satisfied the FLSA’s notice requirement. Judge Torres ruled that although “a generic government poster could inform employees that minimum wage obligations exist, it could not possibly inform employees that their employers intend to take the tip credit with respect to their salary.”