In complying with these minimum wage laws, restaurant owners have certain options that are not available to most other businesses.  These options arise from the differing ways that a restaurant owner can treat customers' tips.

    Both the FLSA and the Pennsylvania Minimum Wage law provide for a "tip credit."  The tip credit essentially allows a restaurant owner to rely on tips received by the employee to make up a portion of that individual's minimum wage.  As with the minimum wage, itself, the amount of the Federal tip credit and the Pennsylvania tip credit differ, and a Pennsylvania restaurant owner must use the Pennsylvania tip credit which requires him to pay a direct wage of $2.83 per hour, while relying on tips to make up the balance of the State minimum.

    Use of the tip credit results in certain legal restrictions on the restaurant's operations.  For example, a restaurant employer who relies on the tip credit must use great care in pooling tips among its employees.  As the California Starbucks decision (above) illustrates, a restaurant owner who uses the tip credit cannot split tip money received among individuals who are not "traditionally tipped" individuals. Effectively, this means that only wait staff can safely be cut into the pool.  Conversely, employees such as managers, cooks and kitchen staff cannot be compensated from the pool.

   In fact, if the restaurant employer desires to compensate non-wait staff employees out of the pool, he can do so only if he pays his staff direct wages that meet or exceed the minimum wage requirements without use of the tip credit. 

   One last possibility involves the practice of charging a "gratuity" or "service charge" collected in lieu of tips.  In that case, the money is not even viewed as  "tip" for minimum wage law purposes.  As a result, no use of the tip credit is allowed and, as you might expect from the above discussion, the gratuity money can be divided up however the restaurant owner desires. The restaurant owner can cut in or out classes of employees as he sees fits -- provided that his decisions do not amount to discrimination under Federal and State anti-discrimination laws, which is a topic unto itself.

-- Rod Fluck