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Problem
Forcing tipped employees to declare more tips than they actually made, or want to claim, is both unethical and can be illegal.
It can be illegal if managers tell them that they have to do it or else. The threat of reprisal is in fact coercion. Thus, solely under duress would an employee claim more than they would otherwise want.
Motive
The Company
Why would a company and its managers want tipped employees to claim more?
Because if an employees tips plus the $2.13 hr. they are paid doesn't at least meet, or exceed, the minimum wage - then the company has to legally pay the difference. This could mean millions of dollars a year, and that’s not going to happen.
The Managers
Managers are conveniently not given the knowledge. Most managers only know what their company wants them to know. They simply and obediently do what they are told. If the company says to have no “Make-Up” pay or your bonus will be smaller – then rest-assured, managers are going to make damn certain that there isn’t going to be any. It’s their money and they are going to make the most possible.
They don’t know that it is legally wrong. Most managers only learn of labor law from their companies. Most don’t take work home with them. They already spend 10-14 hrs a day, several days a week at work. Self-directed study of employment law isn’t high on their personal-time agenda.
Illegal Tactics
Managers are unofficially pressured to track down employees and have them “fix” their tips declared. It is called “Make-Up” tips. Employees are even called at home and instructed to come in on their off-days to declare this “Make-Up” pay. Employees have even been told that if they don’t declare all their tips, or if they have any “Make-Up” pay in the future that…”they will be put back through training”… – because it must be their fault that they are not making at least minimum wage.
This is a lie; this is coercion; and this is illegal.
How Can Employees Respond Legally?
Punitive damages due to violating their rights. A company does not have any explicit right legally to order, or use any form of coercion, to make citizens claim more taxable income.
The threat of re-training an employee for not claiming more taxable income is coercion in the form of extortion.
Coercion is the use of express or implied threats of violence or reprisal (as discharge from employment) or other intimidating behavior that puts a person in immediate fear of the consequences in order to compel that person to act against his or her will.
Extortion is the crime of obtaining money or some other thing of value by the abuse of one's office or authority.
How To Avoid Trouble
There isn’t any way. Companies are not going to just give up millions a year. Employees are going to continue to learn in our litigious society. The only possible way, is the one that no company will ever agree with. Just pay the damn money to people. But this solution could never happen. Money, Money, Money is a powerfully over-whelming motive.
Managers could become more informed. They could not use extortive measures to get employees to comply. But managers don’t know of this issue yet.
Society could change the law and institute licensing for people with the title of manager and supervisor. By making it mandatory to have a license, for anyone having the responsibility of directing any aspect of a company with employees. This license comes at the end of a course teaching and ensuring knowledge of ethics and current employment law. This removes the excuse of ignorance, and makes it more enforceable and punishable in court for employees. Making it more costly in a court settlement than the current gain they get from doing the extorting, will help remove some of the motive.
Please Comment
I hope this brief article helps someone. If you have any questions or would like to add your insight or oppositional views - then please, please comment here. I would love to here what you have to say.
6 Comments
At my restaurant at the end of the night the computer prompts us to claim our direct tips. We were told to always claim zero because the manager would take care of it for us. I know it is illegal not to claim 100% of your tips, but is it legal for management to claim tips for us? I saved all of my employee reports and clock-out slips for one pay period and when I added up the hours from my clock-out slips it adds up to my paycheck, but when I add up all of the claimed tips it came to $205, but my paycheck said $310. Also, we never get paychecks with money on them, it's always "0.00." This just doesn't seem right. The GM has given several different excuses. Once he said that the computer automatically claims 12% of your sales, and another time he told an employee that he claims 15% so that way we don't get in trouble with the IRS. I thought that the only thing the computer and the manager can claim is credit card tips and only the employees can claim their cash tips & not the manager or computer. Should I go to the IRS or the labor and wage board and file a complaint?
Though I do not claim to be a legal adviser or agent of the IRS; I can tell you with absolute certainty; that a manager, and the company; cannot legally tell you how much to claim. They cannot claim tips for you; other than those that are gathered electronically; such as, credit cards. They do legally have to provide for you a reliable means to claim tips in an accurate manner.
They especially cannot claim more tips on your behalf and without your explicit permission - this is especially illegal.
So, why would they possibly do this?
First - the company is legally required to pay minimum wage. If your actual earned tips; combined with the hourly wage for tipped employees ($2.34, in most states); doesn't equal the present full minimum wage ($5.65, in most states); then they have to pay you the difference. Now most aren't aware of this; but that also means they pay more for associated labor cost; such as, workers comp, etc..
The reason why your checks are always $0.00. Although it isn't uncommon for servers and bartenders to make great money in the right place and have checks that zero out. I have seen this in the past.
I am sure from witnessing other managers and owners over the years; that they are claiming more for you to avoid having to pay the difference. Count on it.
Now second -
Because the Food&Beverage industry is audited very frequently. And, the company has to pay for the audit and the auditors.
What I would do if I was you -
1) Keep your mouth shut and don't draw attention until you have finished your homework. This is important! Don't tell anyone who has loose lips. People like to gossip and also suck-up by narcing to the boss.
2)Verify the actual minimum wage in your state and city. By federal law a poster has to be hung somewhere in the building for employees. But, this is for the federal minimum wage; and some states and even cities require more than the federal wage due to localized cost-of-living. So verify for sure what it is in your area.
3) There is an IRS office in every city where you can get the free publications from the IRS itself. It will explain in detail tax law pertaining to tipped employees. (You will want this with you later when you meet with management to discuss things - proof-in-hand)
4) It is very important (hyper-critical) that you begin keeping accurate and consistent records. Go and buy a small ledger from a office supply like Staples. Each shift jot down the pertinent details such as; cash and credit tip amounts.(You can carry a much smaller little spiral-bound note pad and enter it more formerly into your ledger book when you get home. This would be practical)
With credit cards write down -
a)name
b)last four digits of card
c)date of transaction
d)tip amount
With cash -
a) if you know them as regulars; make note of their name
b) date
c) amount of tip
Now, I know from experience that when your busy, this might seem like a lot of work - but it will take less than 10 seconds!
This will lend you a great deal of credibility in a court or other venue. It may help avoid court all together, by making the employer take you seriously. Not to mention, it can help with getting records straight in the future, when it comes to student loans. If the loan officers think you made, or make, more money; then you might be disqualified.
5) Record down in writing; or with recorder; what the manager tells you as the reason why things are done the way that they are done. List any witnesses and time/date. Be accurate. So long as your not in a private space where the manager has the "reasonable-expectation-of-privacy" you can record what they say and it be submittable. But check with a legal professional about this -I'm not one.
6) Gather other employees into your fold that you trust and have the courage to see things through. Groups have greater influence than individuals. Think 'class action'.
In close, I have several articles yet to finish that just happen to cover this kind of subject matter. You have encouraged me to get off my butt an finish things.
Let me know of your progress and findings.
My boss keeps telling me that 13% is not enough to claim on my daily check outs. I am a waitress in California and i would like to know if he has legal controll over how much i claim on my cash tips every day. By law, how much am i supposed to claim? I had heard that it was 10%.What i can tell you is that i have been claiming more than what i am walking with everyday!
In no state can an employer tell you how much to claim - in either a percentage or dollar amount. Giving the manager the 'benefit of the doubt' - that person is only doing what he/she been led to do.
If your actual tips combined with your wage doesn't add up to the present minimum wage, then the company has to pay you the difference. They don't want to do this, and thus, persuade their managers to have employees claim more.The manager is only looking at something on the computer and trying to make the numbers match up - as trained.
Please read the response above that I gave to the first commenter.
Best Regards
My name is Orlando Calderon.
I work at chili's sawgrass and on my W4 I claimed 0. (All cash tips- NO Taxs taken out). So my minimum wage should be 6.79, but the managers changed my claim on my form from 0 to 1 with out my knowlage so actually i'm getting payed 3.77 as my minimum wage. I copyed my W4 form that they changed, and filled out A new W4. Know they still tell me that, claim(1-?) or no claim (0), my Cash tips are taxed either way. Know I have A Question? Do you have, or know of any LEGAL DOCUMENTS that you can SEND ME that states, (cash tiped employee that claim 0 on their W4 dont have taxs tacken out of their cash tips). Anything that you send me would be really helpful.
Thank you for your time!
My daughter worked for a restaurant that insisted their employees claim at least 12% of their register sales as tip income. They also made them pay for any "walked" tickets. Recently, after having to do her "tip out" plus pay for a walked ticket, she only made about 6% of her register sales. When she said that was what she was claiming, her manager told her she would report 12% of her sales as income or she was fired. When she refused to claim 12%, they fired her. What is her recourse? Who does she report these people to? We live in Texas.
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