Restaurant’s Fee Deduction Program Violates FLSA

Employers whose workers earn most of their compensation through tips, such as restaurant employees, know that they walk a fine line to ensure compliance with the Fair Labor Standards Act (“FLSA”) and numerous other laws.  Last month the Fifth Circuit rejected a program instituted by a restaurant operator in Texas that deducted certain fees before paying tips to its restaurant workers that were earned by customers using credit cards. While the ruling does not close the door on such arrangements, employers who utilize such programs will be under scrutiny to ensure strict compliance with the FLSA.

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