A Miami restaurant’s mandatory 18% service charge did not constitute a “tip” under the Fair Labor Standards Act (FLSA) and therefore was properly applied toward satisfying the FLSA’s employee wage requirements, the U.S. Court of Appeals for the Eleventh Circuit recently held, affirming summary judgment in favor of the employer. Compere v. Nusret Miami, LLC, 2022 U.S. App. LEXIS 7293 (11th Cir. Mar. 18, 2022). The Eleventh Circuit has jurisdiction over the federal courts in Alabama, Georgia, and Florida.
Department of Labor (DOL) regulations defining what constitutes a “tip” expressly provide that mandatory service charges are not tips. The central characteristic of a tip is customer discretion: If the customer decides whether to leave a gratuity, and if so the amount of that gratuity, then it is considered a tip under FLSA regulations. Conversely, if the employer imposes a fee that the customer has no choice but to pay (unless, for example, the employer waives the fee to resolve a complaint about the service provided), the fee is not a tip and the employer may use it to satisfy its wage obligations.
Since its opening five years ago, Nusret Miami (“Nusret”), an upscale steakhouse in Miami, Florida, has added a mandatory 18% “service charge” to customer’s bills, after which it redistributes those charges to certain employees to cover the restaurant’s minimum and overtime wage obligations. The employees who receive a portion of the service charges are...
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