Client Bulletin #370 - For PDF version of this Client Bulletin, click here.
Employers with restaurant or hotel operations in Missouri should take heed of recent developments concerning the payment of tipped employees working in Missouri. Because of a recent change in interpretation of Missouri’s state minimum wage, employers will have to pay a higher minimum wage to tipped employees.
Effective January 1, 2007, Missouri's minimum wage was raised from $5.15 to $6.50 per hour. The Missouri Department of Labor and Industrial Relations (MODOL) had issued guidance stating that the increase did not affect the wages required for tipped employees, such as servers: employers wishing to take tip credits still had to pay a minimum cash wage or base rate of only $2.13 per hour.
However, contrary to its prior interpretation, the MODOL is now taking the position that employers of tipped employees must pay a cash minimum wage of at least $3.25 per hour (50 percent of the $6.50 minimum wage). This new interpretation was announced on March 14, 2007.
Governor Matt Blunt’s office, under pressure from a group of community rights activists and law professors who claimed that the MODOL was misinterpreting the law, ordered the MODOL to change its initial interpretation. For what it is worth, the governing statutory language is poorly worded and open to conflicting interpretations.
Under both the current and prior interpretations, the portion of the $6.50 minimum wage that is not covered by the base rate is a “tip credit,” provided that the employee receives and retains sufficient tip income to cover the credit claimed by the employer.
Although the MODOL does not file lawsuits for back wages, the state minimum wage statute does provide a private right of action, meaning that individual employees can sue their employers. Prevailing plaintiffs are entitled to remedies that are similar to those available under the federal Fair Labor Standards Act: back pay, liquidated damages in an amount equal to the back pay, and costs and attorneys’ fees. There is a two-year statute of limitations.
Constangy’s recommendation: As of March 14, 2007, all tipped employees should be paid a base rate of at least $3.25 per hour. Less clear is what to do about tipped employees who were paid less than a base rate of $3.25 per hour for the time period January 1, 2007 to March 14, 2007. The safest course is to pay the difference between the base pay that employees received and $3.25 per hour for all hours worked during that time frame. It should be noted, however, that there may well be a legal challenge in the courts to the new interpretation, and it is not possible at this time to predict the outcome if such a challenge is undertaken. Thus, there is at least some chance that the courts could rule that the new MODOL interpretation is invalid.
If you have questions concerning this issue, or any other laws affecting employers in Missouri, please contact any of our lawyers in Constangy’s Kansas City, Missouri office.
Constangy, Brooks & Smith, LLC has counseled employers, exclusively, on labor and employment law matters since 1946. The firm represents Fortune 500 corporations and small companies across the country. More than 100 lawyers work with clients to provide cost-effective legal services and sound preventive advice to enhance the employer-employee relationship. Offices are located in Georgia, South Carolina, North Carolina, Tennessee, Florida, Alabama, Virginia, Missouri, and Texas. For more information about the firm's labor and employment services, visit www.constangy.com, or call toll free at 866-843-9555.