Collective Action Claims Denny’s Applied Unlawful Tip Credit to Servers’ Wages

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Denny’s, Inc. is facing a proposed collective action lawsuit out of Florida that claims the restaurant chain applied an illegal tip credit to servers’ wages that did not meet Fair Labor Standards Act (FLSA) requirements.

According to the complaint, Denny’s paid tipped waitstaff a sub-minimum wage and used employees’ tips as a credit against its minimum wage obligation. While the case concedes that tip-crediting practices are permitted under the FLSA, the statute specifies that employers who pay tipped workers less than minimum wage must meet the following conditions:

• Employers must inform tipped employees of the FLSA’s tip-credit provisions;
• Employers cannot require tipped employees to perform non-tipped work unrelated to their tipped occupation; and
• Employers cannot require tipped employees to perform non-tipped work related to their tipped occupation for more than 20 percent of their hours worked.

Denny’s allegedly violated all three of these requirements. Aside from failing to inform tipped employees of the FLSA’s tip-credit provisions, the defendant, the lawsuit alleges, compelled servers to perform untipped work related to their serving position—such as making coffee and toasting bread—for more than 20 percent of each workweek. Furthermore, the case contends that Denny’s treated servers as “utility employees” and required waitstaff to perform non-tipped duties that were unrelated to their regular tipped work, such as taking out the trash, washing dishes, preparing salads and specialty drinks, and setting tables.

Servers at Denny’s were paid a sub-minimum wage for all hours worked, regardless of whether the workers were performing tipped or non-tipped duties, the suit claims. The case contends that since Denny’s tip-credit practices violated FLSA standards, servers are entitled to recover unpaid minimum wages.

The lawsuit seeks to represent a class encompassing everyone who worked as a server for Denny’s in the past three years and was compensated based on an hourly tip-credited rate.