Federal court denies race track’s motion for summary judgment

June 2008 Hospitality Law

Employers face a serious issue when determining whether an employee is eligible to receive tips, pursuant to the Fair Labor Standards act or other applicable state laws. If the employee is eligible, the employer reserves the right to decrease the employee’s pay. The problem arises when employers misclassify employees as “tipped employees” prompting wage and hour class-action lawsuits.

To avoid this type of litigation, employers must be meticulous in their evaluation of job responsibilities, and only classify those “tipped employees” as those who work in positions that regularly receive tips. The recent decision in Wajcman and Ashmore v. Investment Corp. of Palm Beach d/b/a Palm Beach Kennel Club, demonstrates the case-by-case analysis courts apply to these types of violations, and reinforces the need for employers to take precautions.