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Ninth Circuit Resets Wage Case for Servers, Bartenders

By William Vogeler, Esq. on September 20, 2018 | Last updated on March 21, 2019

IHOP didn't seriously change its name to IHob; that was just to get customers' attention.

But the U.S. Ninth Circuit Court of Appeals got some serious attention from the International House of Pancakes in a labor case. Along with many other restaurants, IHOP may have to change its wage practices.

In a consolidated ruling with Marsh v. J. Alexander's LLC, the Ninth Circuit said the plaintiffs have claims against their employers for allegedly taking their tips and underpaying them.

Tip Credit

The Fair Labor Standards Act allows employers to credit employees' tips -- in tipped occupations -- to offset minimum wage. But if a worker's combined wages and tips do not meet the minimum wage, the employer must make up the difference.

Alec Marsh and other former servers and bartenders sued their employers, including IHOP, Denny's, P.F. Chang's, J. Alexander's and other chains, for using tip credits to reduce wages for non-tipped work.

Marsh said he worked 32-hour weeks, spending half his time on tasks such as cutting and stocking fruit. He claimed his employer took a tip credit because he was tipped for his other work as a server.

As a result, Marsh and the other plaintiffs said they were paid less than they deserved under the federal law. A trial court dismissed their claims, but the en banc Ninth Circuit reversed and remanded.

"Dual Job Employee"

Judge Richard Paez said the law prohibits employers from taking tip credits for non-tipped tasks. He wrote that the defendants' practice "effectively makes tips -- intended as gifts to servers for their service -- payments to employers."

He said the federal tip credit regulation "clearly contemplates that a server who performs unrelated tasks, such as cleaning restrooms, is a dual job employee entitled to the full minimum hourly wage for her unrelated work."

Judges Sandra Ikuta and Consuelo Callahan dissented, saying the labor regulation "effectively eliminated an employer's statutory right to take a tip credit." Ikuta said the Fair Labor Standards Act created "an unfair and unexpected imposition of liability on employers."

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